Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/114736
Authors: 
Gründler, Klaus
Scheuermeyer, Philipp
Year of Publication: 
2015
Series/Report no.: 
Würzburg Economic Papers 95
Abstract: 
Evidence from a current panel of harmonized worldwide data highlights a robust negative effect of income inequality on economic growth that we trace back to its transmission channels. Less equal societies tend to have less educated populations and higher fertility rates, but not necessarily lower investment shares. The first two effects are harmful for growth and reinforced by limited credit availability. Higher public spending on education attenuates the negative effects of inequality. In addition to the inequality-growth relationship, we examine the direct influence of effective redistribution. When net inequality is held constant, public redistribution negatively affects economic growth. Redistribution hampers investment and raises fertility rates. Combining the negative direct growth effect and the indirect positive effect operating through lower net inequality, the overall impact of redistribution is insignificant. Whereas this result stems mainly from advanced economies, redistribution is beneficial for growth in low and middle-income countries.
Subjects: 
Economic Growth
Redistribution
Inequality
Panel Data
JEL: 
O11
O15
O47
H23
Document Type: 
Working Paper

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