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Inequality or poverty: which is bad for growth?

Vol: 
CAMA Working Paper 43/2016
Author name: 
Robert Breunig
Omer Majeed
Year: 
2016
Month: 
July
Abstract: 

Recent research has highlighted a negative impact of inequality on economic growth. We re-evaluate this hypothesis focusing on both inequality and poverty and their interaction. We replicate previous results showing that inequality has a negative impact on growth. However, we show that when we account for both inequality and poverty, the negative effect of inequality on growth appears to be concentrated amongst countries with high poverty. This would argue for policies targeted towards alleviating poverty rather than policies about redistribution.

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