Inequality of Opportunity, Inequality of Income and Economic Growth

Author/Editor:

Shekhar Aiyar ; Christian H Ebeke

Publication Date:

February 15, 2019

Electronic Access:

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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.

Series:

Working Paper No. 19/34

Subject:

English

Publication Date:

February 15, 2019

ISBN/ISSN:

9781484396988/1018-5941

Stock No:

WPIEA2019034

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

23

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