New ways of looking at old issues: inequality and growth

Abstract

The paper uses new cross-country data on income and asset (land) distribution to show that (i) there is a strong negative relationship between initial inequality in the asset distribution and long-term growth; (ii) inequality reduces income growth for the poor, but not for the rich; and (iii) available longitudinal data provide little support for the Kuznets hypothesis. Policies that increase aggregate investment and facilitate acquisition of assets by the poor might thus be doubly beneficial for growth and poverty reduction.