Should-Read: Salvatore Morelli: Is growing inequality hurting our economies?
Should-Read: Salvatore Morelli: Is growing inequality hurting our economies?: “The recent 2007–2008 collapse of the global financial system naturally acted as a catalyst for growing concerns around the increasing dispersion of economic resources within most advanced economies… https://equitablegrowth.org/research-analysis/is-growing-inequality-hurting-our-economies/
…Subsequently, the landmark book by Thomas Piketty, Capital in the Twenty-First Century, underlined very clearly the risk of the rising importance of inherited intergenerational advantages in transforming our societies into patrimonial capitalistic economies dominated by wealthy dynasties…. The reverse direction of inquiry—how macroeconomic performance may be affected by the extent of inequality—rests instead outside the scope of Piketty’s analysis and modeling…. In fact, the investigation of the (fairly complex) relationship between inequality and economic growth has been featured prominently in the empirical literature on inequality, with disparate findings and hypotheses pointing in different directions….
Economic theory provides different anchors as to why the so-called equity-efficiency trade-off may fall apart…. If most of the dispersion of economic outcomes of individuals results from inequality of opportunities… opportunities are not necessarily given to the most talented but to individuals with predetermined circumstances, and economic growth may in turn be weakened…. High levels of income and wealth inequality… may be detrimental to the level of economic activity as only those who inherit sufficiently high wealth may be able to pay the fixed cost of entrepreneurial activity or education…. Investments in productive capital and risky activities themselves can also be discouraged by highly unequal distribution of resources as a result of increasing rent-seeking behavior and other expropriation actions…. Does wealth inequality really promote rent-seeking behavior?… Bonica and Rosenthal documented the U.S. campaign contributions of the Forbes 400 wealthiest individuals between 1982 and 2012. Their figures imply an average individual donation of $10,000 for each $1 million increase in wealth—presumably a relatively easy achievement for a billionaire…