Inequality of Opportunity and Growth
نویسندگان
چکیده
Theoretical models and empirical studies exploring the relationship between income inequality and growth reach a disappointing inconclusive answer. We postulate in this paper that one reason for this inconclusive result is that income inequality consist at least in two different sorts of inequality, inequality of opportunity and effort. These two types of inequality would affect growth through opposite channels. As a result, the relationship between income inequality and growth could be positive or negative depending on which kind of inequality is more relevant. We test this proposal using depurated data of the PSID database for 24 US states from 1980 to 2000. We estimate regressions that relate growth with overall income inequality, inequality of opportunity and other widespread used control variables. We find robust support for a negative relationship between inequality of opportunity and growth and a positive relationship between growth and income inequality. JEL Classification: D63, H00.
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