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Tuesday, October 23, 2012

The 'Old News' on Inequality and Growth

A professor of sociology at Berkeley, Claude Fischer, says all the recent talk about inequality causing a reducing in growth is "old news":

A cost of inequality: growth, by Claude Fischer: A recent story in The New York Times, back in its business section, had important news about inequality: “Income Inequality May Take Toll on Growth.” A couple of economists at the IMF reported research (here) showing that, across many countries, periods of greater income inequality tend to be followed by slow-downs in economic growth.  ...
This is, actually, old news. About twenty years ago the research literature already showed that inequality probably damped the economy (see pp. 126ff here). But this remains important to repeat – not just because reporting the baleful effects of inequality now has the imprimatur of the IMF, but also because so many people still resist the news; they insist instead on believing the opposite, that inequality stimulates the economy, to the benefit of everyone. And, of course, this insistence has political implications right now. ...
To the extent that facts matter in such a politicized debate, it is becoming increasingly clear that equality rather than inequality is a better policy for economic growth. ...

    Posted by on Tuesday, October 23, 2012 at 12:46 PM in Economics, Income Distribution, Productivity | Permalink  Comments (65)


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