Four models of growth and inequality

Abstract

The chapter shows trends in economic growth and social inequalities in 18 advanced economies in the last 30 years. Four growth models emerge from the combination of tendencies in economic growth and social disparities. A first group of countries – mainly Anglo-Saxon – is defined as non-inclusive growth (NIG) because they share high income levels, high economic growth, and high inequality trends. Conversely, countries with high-income levels, high economic growth, and low inequality in common are gathered in a second set labelled as the inclusive growth model. Since the countries of the latter set diverge remarkably in terms of labour market dualisation – which has an effect on widening disparities – they have been split into two variants. On the one hand, there is the egalitarian inclusive growth (EIG) model, typical of the experience of Northern European countries. On the other hand, there is the dualistic inclusive growth model (DIG), which is closer to that of continental European countries. Finally, the non-inclusive low-growth model applies to Southern European countries. They show a configuration of low-income levels, low economic growth, and high inequality. The last part of the chapter introduces preliminary differences between the four growth models regarding public spending, tax revenues and public debt.