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. The long-run (or total) e¤ect of higher inequality tends to be negative.JEL classi…cation: O11, O15, O43

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. The long-run (or total) e¤ect of higher inequality tends to be negative.JEL classi…cation: O11, O15, O43

It is often purported that unusually dry conditions provoke riots by intensifying the competition for water. The present paper explores this hypothesis, using data from Sub-Saharan Africa. We rely on monthly data at the cell level (0:5 0:5 degrees), an approach that is tailored to the fact that riots are short-lived and local events. Using a drought index to proxy for deviations of the actual climatic water balance from the normal one, we …nd that a one-standard-deviation fall in the index (signaling drier conditions) raises the likelihood of a riot in a given cell and month by 8.5 percent. We further observe that the e¤ect of unusual dryness is substantially larger in cells that combine a low supply of blue water with signi…cant agricultural activity, a …nding that supports the relevance of the water-competition mechanism.JEL classi…cation: D74, O13