No, answers Jason Furman, for mainly three reasons: a) empirical evidence on whether inequality results in lower long-run growth is inconclusive; b) not much research has been done on the type of impact that policies to reduce inequality have on growth; and c) think of China where higher growth substantially increased inequality but also lifted millions of people out of extreme poverty.
Should Policymakers Care Whether Inequality Is Helpful or Harmful For Growth?
By: Jason Furman – Harvard University
What does the data show
From “Inequality and prosperity in the industrialized world” by Citibank and Oxford University
Up to 2000 global inequality reduction was driven solely by China. After 2000 the “job” of decreasing global inequality was done by India. If this Asian convergence that brings average income of China, India, Vietnam etc closer to the one in rich countries ceases, while within country inequalities continue to rise, then the Gini coefficient will start rising, argues Branko Milanovic.
Figuring out various income inequalities: what can they tell us?
By: Branko Milanovic – City University of New York
The case for efficiency and equity
Gaspar and Garcia-Escribano argue that in advanced countries fiscal policy can offset one third of income inequality before taxes and transfers. Their empirical evidence shows that it is possible to achieve inclusive sustainable growth with the right mix of policies despite the fact that some policies might have conflicting effects on growth and distribution.
Inequality: Fiscal Policy Can Make the Difference
By: Vitor Gaspar, Mercedes Garcia-Escribano – IMF
