New ways of looking at old issues: inequality and growth

Deininger, Klaus; Squire, Lyn

doi:10.1016/s0304-3878(98)00099-6

Cited by 1,169 publications

(764 citation statements)

References 21 publications

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“…The growth-enhancing effects of lowering inequality have been found using crosscountry analysis (investigating the impact of initial inequality on subsequent economic growth, for example, Deininger and Squire, 1998). They confirm that different levels of inequality between countries have growth implications.…”

Section: Growth Inequality Poverty Reduction and The Measuremenmentioning

confidence: 58%

Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators

Klasen

2008

World Development

136

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income IndicatorsStephan Klasen University of Göttingen Germany Email: sklasen@gwdg.de AbstractThis paper addresses two issues concerning the measurement of pro-poor growth, a central concept for sustainable poverty reduction in developing countries. First, it attempts to clarify the debates about the definition and measurement of pro poor growth distinguishing between a weak and a strong absolute as well as a relative definition. The relevance of each definition depends on the purpose of the analysis as well as the assumptions regarding growthinequality trade-offs. Given the focus of existing measures of pro-poor growth on the income dimension, the second contribution is to present ways to apply the growth incidence curve and the Ravallion-Chen framework of measuring pro-poor growth to non-income indicators. The analysis, which is applied to Bolivia for illustrative purposes, shows that the extension of the propoor growth toolbox to non-income dimensions greatly improves our understanding of the trends in non-income indicators along the entire distribution and thus greatly increases our ability to monitor progress towards the non-income Millennium Development Goals (particularly goals 2-6) and assess the linkages between income and non-income poverty along the entire distribution. This can be of critical importance for poverty monitoring as well as policy interventions including the relative merits of growth versus direct intervention to improve the non-income dimensions of poverty.

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Section: Growth Inequality Poverty Reduction and The Measuremenmentioning

confidence: 58%

Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators

Klasen

2008

World Development

136

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“…As for the second question, there is consensus in the empirical literature that economic growth may affect inequality [Deininger and Squire (1998); Chen and Ravallion (1997)] but there is a significant variance in the literature that look into the relationship between public expenditure and inequality. These studies can roughly be categorized into three main themes: First, the relationships between different measures of social capital, its relationship to government actions, and inequality; secondly papers that try to test the median voter hypothesis and its implications for fiscal policy; thirdly studies that specifically look into the effects on inequality by redistributive public spending (specifically education and health).…”

Section: Previous Literaturementioning

confidence: 99%

Distributional Effects of Growth and Public Expenditures in Africa: Estimates for Tanzania and Rwanda

Almanzar

Torero

2017

World Development

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In this paper we explore the effects of fiscal policies and growth on measures of the household welfare across the distribution of expenditure for two countries in Africa: Rwanda and Tanzania. We explore issues of inefficiency in government expenditures and dilution of growth benefits among the better off sectors of the population in these two countries (in lieu of the poor sectors) by looking at the effects within a country and across different groups of households and administrative entities. We exploit variation in expenditures and growth across and within regions of each country to estimate the elasticities of income with respect to these expenditures at different points of the expenditure distribution, using household survey data and government expenditure at the district level. We find that overall, mean income growth benefits the top income groups. The welfare spillovers are mostly present for top 20% of the income distribution, with the middle of the distribution in Tanzania responding slightly to these spillovers. Social Public expenditures does not affect inequality in a considerable manner, but tend to work towards decreasing inequality. However, mean income growth is related to 'increases' in inequality in the sense that the richest sectors of the population benefit the most from growth. We find that the growth elasticity of income is only above one for the top quintile in both countries. In Tanzania a 1% increase in average household expenditure is related to a 1.96% expenditure growth in the top quintile and 0.43% in the third quintile. While in Rwanda it is related to a 1.93% increase in household expenditure in the top 20% of the distribution.

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“…However, Forbes (2000) finds a positive impact of inequality on growth, and Banerjee and Duflo (2003) show a nonlinear impact. Moreover, Deininger and Squire (1998) reveal that asset inequality has a negative impact on economic growth, but only in nondemocratic countries, while Barro (2000) finds that the effects of inequality on growth are negative in poor countries, but pos-itive in rich countries. The negative relationship between inequality and growth has been explained by theories as varied as credit market imperfections (Galor and Zeira 1993), redistributional policies as a result of majority voting Rodrik 1994, Persson andTabellini 1994), and political opposition by landowners to public support for human capital formation (Galor et al 2009).…”

Section: Related Literaturementioning

confidence: 99%

Inequality, extractive institutions, and growth in nondemocratic regimes

2016

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This study investigates the effect of inequality on economic growth in nondemocratic regimes. We provide a model in which a self-interested ruler chooses an institution that constrains his or her policy choice. The ruler must care about the support share of citizens in order to keep power. Under an extractive institution, the ruler can extract a large share of citizens' wealth, but faces a high probability of losing power because of low public support. We show that inequality affects the ruler's trade-off between the expropriation of citizens' wealth and his or her hold on power. Large inequality among citizens makes the support share for the ruler inelastic with respect to his or her choice of institution. Thus, the ruler chooses an extractive institution, which impedes investment and growth. These results provide an explanation for the negative relationship between inequality and growth and the negative relationship between inequality and the quality of institutions, both of which are observed in nondemocratic countries.JEL classification: O11, D31, P14, P16

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New ways of looking at old issues: inequality and growth

Cited by 1,169 publications

References 21 publications

Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators

Economic Growth and Poverty Reduction: Measurement Issues using Income and Non-Income Indicators

Distributional Effects of Growth and Public Expenditures in Africa: Estimates for Tanzania and Rwanda

Inequality, extractive institutions, and growth in nondemocratic regimes

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