Inequality and growth: The neglected time dimension

D. Halter, M.C. Oechslin, J. Zweimüller

Research output: Contribution to journalArticleScientificpeer-review

77 Citations (Scopus)

Abstract

Inequality affects economic performance through many mechanisms, both beneficial and harmful. Moreover, some of these mechanisms tend to set in fast while others are rather slow. The present paper (i) introduces a simple theoretical model to study how changes in inequality affect economic growth over different time horizons; (ii) empirically investigates the inequality–growth relationship, thereby relying on specifications derived from the theory. Our empirical findings are in line with the theoretical predictions: Higher inequality helps economic performance in the short term but reduces the growth rate of GDP per capita farther in the future. The long-run (or total) effect of higher inequality tends to be negative.
Original languageEnglish
Pages (from-to)81-104
JournalJournal of Economic Growth
Volume19
Issue number1
DOIs
Publication statusPublished - Mar 2014

Keywords

  • Inequality
  • economic growth
  • short-term effects
  • long-run effects

Fingerprint Dive into the research topics of 'Inequality and growth: The neglected time dimension'. Together they form a unique fingerprint.

Cite this