Inequality of Opportunity, Inequality of Income and Economic Growth

February 15, 2019

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Format: Chicago

Shekhar Aiyar, and Christian H Ebeke. Inequality of Opportunity, Inequality of Income and Economic Growth, (USA: International Monetary Fund, 2019) accessed September 19, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We posit that the relationship between income inequality and economic growth is mediated by the level of equality of opportunity, which we identify with intergenerational mobility. In economies characterized by intergenerational rigidities, an increase in income inequality has persistent effects—for example by hindering human capital accumulation— thereby retarding future growth disproportionately. We use several recently developed internationally comparable measures of intergenerational mobility to confirm that the negative impact of income inequality on growth is higher the lower is intergenerational mobility. Our results suggest that omitting intergenerational mobility leads to misspecification, shedding light on why the empirical literature on income inequality and growth has been so inconclusive.

Subject: Human capital, Income distribution, Income inequality, Labor, National accounts, Personal income, Wages

Keywords: Global, Growth, Human capital, Income, Income distribution, Income Gini coefficient, Income Inequality, Income inequality variable, Inequality relationship, Inequality-growth nexus, Intergenerational Mobility, Per capita income, Personal income, Wages, WP

Publication Details

Pages:

23
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/034
Stock No:

WPIEA2019034
ISBN:

9781484396988
ISSN:

1018-5941

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