Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/99036
Authors: 
Ferreira, Francisco H. G.
Lakner, Christoph
Lugo, Maria Ana
Özler, Berk
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers 8243
Abstract: 
Income differences arise from many sources. While some kinds of inequality, caused by effort differences, might be associated with faster economic growth, other kinds, arising from unequal opportunities for investment, might be detrimental to economic progress. We construct two new metadata sets, consisting of 118 household surveys and 134 Demographic and Health Surveys, to revisit the question of whether inequality is associated with economic growth and, in particular, to examine whether inequality of opportunity – driven by circumstances at birth – has a negative effect on subsequent growth. Results are suggestive but not robust: while overall income inequality is generally negatively associated with growth in the household survey sample, we find no evidence that this is due to the component we attribute to unequal opportunities. In the DHS sample, both overall wealth inequality and inequality of opportunity have a negative effect on growth in some of our preferred specifications, but the results are not robust to relatively minor changes. On balance, although our results are suggestive of a negative association between inequality and growth, the data at our disposal does not permit robust conclusions as to whether inequality of opportunity is bad for growth.
Subjects: 
inequality
inequality of opportunity
economic growth
JEL: 
D31
D63
O40
Document Type: 
Working Paper

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