Does equality reduce growth? Some empirical evidence

Abstract

This study intends to provide some empirical evidence on the connection between equality and growth. Accordingly, two different samples of countries have been explored over the last three decades using panel data. In the first subsample, encompassed by medium income nations, the relationship between equality (proxied by the Gini index) and growth seems to be hump shaped. In the second subsample, made up by high-income countries, the connection is unambiguously negative – more equality is detrimental for growth. These results suggest that the impact of equality on growth may be different at the various stages of development.

Acknowledgement

We are grateful to V. Sanchez Marcos for helpful comments on previous versions of this paper. The usual disclaimer applies.

Notes

Using non-parametric methods, Banerjee and Duflo (2000) arrive at a similar conclusion.

Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Italy, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, UK and USA.

Other variables have been included, common in growth analysis, to eliminate potential biases due to omitted variables.

The countries included are: Argentina, Brazil, Chile, Colombia, Costa Rica, Dominic R., Mexico, Peru, Uruguay and Venezuela.