Inequality or Poverty: Which is Bad for Growth?

Breunig, Robert V.; Majeed, Omer

doi:10.2139/ssrn.2811453

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Inequality or Poverty: Which is Bad for Growth?

CAMA Working Paper No. 43/2016

37 Pages Posted: 20 Jul 2016

See all articles by Robert V. Breunig

Robert V. Breunig

Australian National University (ANU) - Crawford School of Public Policy; Tax and Transfer Policy Institute (Crawford School of Public Policy, ANU); IZA Institute of Labor Economics

Omer Majeed

Crawford School of Public Policy, Australian National University

Date Written: July 8, 2016

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 rather than policies about redistribution.

Keywords: Inequality, Economic Growth, Poverty, Cross-Country Regressions

JEL Classification: O47, D63, I39

Suggested Citation: Suggested Citation

Breunig, Robert V. and Majeed, Omer, Inequality or Poverty: Which is Bad for Growth? (July 8, 2016). CAMA Working Paper No. 43/2016 , Available at SSRN: https://ssrn.com/abstract=2811453 or http://dx.doi.org/10.2139/ssrn.2811453