Is equality really growth-promoting?

Abstract

It has been shown that the more uneven the initial distribution of income, the less an economy is expected to grow. Employing so-called Extreme Bounds Analysis (EBA), it is found that the direct effect of income distribution on growth is fragile. This applies to both democracies and dictatorships. It has also been suggested that income distribution will have different effects when applied to developing as opposed to developed economies. However, the results show that income distribution has the same effect in both developed and developing countries. Nonetheless, this relationship is also fragile.