Morning Must-Read: Heather Boushey and Carter Price: How Are Economic Inequality and Growth Connected?: A Review

Heather Boushey and Carter Price: How Are Economic Inequality and Growth Connected?: A Review: “Ostry, Berg, and their IMF colleague Charalambos Tsangarides…

…include an analysis of the impacts of redistribution, as well as market inequality. They find that economic growth is lower and periods of growth are shorter in countries that have high inequality as measured by the Gini coefficient of income after taxes and transfers.43 In the same paper, the researchers show that transfers (redistributions of income from upper to lower income individuals) do not harm economic growth—at least up to a point consistent with policies in other wealthy nations. This most recent work provides strong evidence that higher levels of income inequality are detrimental to long-term economic growth and that the policies some nations have taken to redress inequality not only do not adversely impact growth but, instead, spur faster growth. Notably, this finding applies to both developed and developing countries…