Is Inequality Harmful for Growth?

Is Income Inequality Really Not Harmful for Economic Growth?∗

We show that in an AK model of endogenous growth with CRRA specifications for both private and public consumption goods, income inequality exerts theoretically ambiguous effects on the optimal capital tax rate and the economy’s growth rate. In a calibrated version of the model, we find that the parameter space can be clearly divided into regions that exhibit a positive or negative relationship ...

Is Inequality Harmful for Innovation and Growth? Price versus Market Size Effects

We introduce non-homothetic preferences into an R&D based growth model to study how demand forces hape the impact of inequality on innovation and growth. Inequality affects the incentive to innovate via a price effect and a market size effect. When innovators have a large productivity advantage over traditional producers a higher extent of inequality tends to increase innovators’prices and mark...

Should Policymakers Care Whether Inequality Is Helpful or Harmful For Growth?

Is inequality harmful for the environment in a growing economy ?

In this paper we investigate the relationship between inequality and the environment in a growing economy from a political economy perspective. We consider an endogenous growth economy, where growth generates pollution and a deterioration of the environment. Public expenditures may either be devoted to supporting growth or abating pollution. The decision over the public programs is done in a di...

Is Fiscal Decentralization Harmful for Economic Growth ?

The global drive towards decentralization has been increasingly justified on the basis that greater transfers of resources to subnational governments are expected to deliver greater efficiency in the provision of public goods and services and greater economic growth. This paper examines whether this is the case, by analysing the relationship between decentralization and economic growth in 21 OE...