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Andrew G. Berg, Jonathan D. Osrty (Translation ed. by: Marina Larionova)

Inequality and Unsustainable Growth: Two Sides of the Same Coin?

2013. Vol. 8. No. 4. P. 77–99 [issue contents]

Berg Andrew - Assistant Director in the IMF’s Research Department, 700 19th Street, N.W., Washington, D.C. 20431; E-mail: Aberg@imf.org

Ostry Jonathan D. - Deputy Director of the IMF’s Research Department, 700 19th Street, N.W., Washington, D.C. 20431; E-mail: Jostry@imf.org


The relationship between income inequality and economic growth is complex. Some inequality is integral to the effective functioning of a market economy and the incentives needed for investment and growth. But inequality can also be destructive to growth, for example, by amplifying the risk of crisis or making it difficult for the poor to invest in education. The evidence has also been mixed: some find that average growth over long periods of time is higher with more initial equality; others find that an increase in equality today tends to lower growth in the near term.

The authors find that longer growth spells are robustly associated with more equality in the income distribution. For example, closing, say, half the inequality gap between Latin America and emerging Asia would, according to our central estimates, more than double the expected duration of a growth spell. Inequality typically changes only slowly, but a number of countries in our sample have experienced improvements in income distribution of this magnitude in the course of a growth spell. Inequality still matters, moreover, even when other determinants of growth duration — external shocks, initial income, institutional quality, openness to trade, and macroeconomic stability — are taken into account.

A key implication of these results is that it is difficult to separate analyses of growth and income distribution. The immediate role for policy, however, is less clear. The analysis does perhaps tilt the balance towards the notion that attention to inequality can bring significant longer-run benefits for growth. Over longer horizons, reduced inequality and sustained growth may thus be two sides of the same coin.


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Citation: (2013) Neravenstvo i neustoichivyi rost: dve storony odnoi medali [Inequality and Unsustainable Growth: Two Sides of the Same Coin?] INTERNATIONAL ORGANISATIONS RESEARCH JOURNAL, 4 (in Russian)
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