Inequality and growth
The role of inequality in actually dampening and distorting economic growth is now widely accepted by economists--including those at venerable laissez-faire institutions like the IMF and the OECD. Indeed, the latter concluded, in its 2012 survey of economic conditions in the US:
Income inequality and relative poverty are among the highest in the OECD. This is associated with a number of negative consequences, including low intergenerational social mobility. High income inequality is attributable to a significant degree to the large dispersion of earned income, which should be addressed by reforming education, so as to provide disadvantaged students with the skills needed to fully realise their potential. To reduce both income inequality and distortions in resource allocation, tax expenditures that disproportionately benefit high earners should be limited over time. In particular, effective tax rates on debt-financed corporate investment and housing should be equalized at the higher rate on equity-financed corporate investment while simultaneously lowering the corporate tax rate. Social transfers could be more effective in alleviating poverty through better targeting of the truly needy and simplifying of transfer programmes.
For varying perspectives, see Andrew Berg and Jonathon Ostry, Inequality and Unsustainable Growth: Two Sides of the Same Coin? (International Monetary Fund, 2011); Anne Lowry, Inequality May Take its Toll on Growth, New York Times (October 2012); Heather Boushey and Adam Hersh, The American Middle Class, Income Inequality, and the Strength of our Economy (Center for American Progress, May 2012); Raghuram Rajan, Is Inequality Inhibiting Growth? Project Syndicate (July 2012)
Discussion of "Inequality and growth"
Add your voice to this discussion.
Checking your signed in status ...