The compatibility of growth and increased equality: Korea

Abstract

If greater inequality results in greater saving which leads to greater investment and growth, then government policies which increase inequality promote growth; this is called the anti‐equality argument. If, however, greater equality produces more consumption which drives investment and growth, then increasing equality produces growth; this is the pro‐equality argument. This essay tests the assumptions behind the anti‐ and pro‐equality arguments. These assumptions are tested using a Two Stage Least Squares procedure on household and corporate data for Korea between 1963 and 1980.