Inequality, poverty and economic growth

Abstract

Recent research has highlighted a negative impact of inequality on economic growth. We re-evaluate this hypothesis focusing on both inequality and poverty and their interaction. We replicate previous results showing that inequality has a negative impact on growth. However, we show that when we account for both inequality and poverty, the negative effect of inequality on growth appears to be concentrated amongst countries with high poverty. This would argue for policies targeted towards alleviating poverty even if they have no effect on inequality. Show more