Can Equality and Growth Be Simultaneously Achieved?

Abstract

This paper attempts to examine whether equal income distribution andsteady economic growth can be achieved at the same time. Unlike previousstudies that investigated either direct or reverse relationships between incomeinequality and per capita GDP growth independently of one another, this papercombines two links together and tries to explain any causal relationshipsbetween them. Using a cross-country dataset, it finds that income distributionand economic growth are not only directly correlated, but they also indirectlyinteract with each other simultaneously through other economic, political, andsocial factors such as education, health, investment, credit market, fiscalpolicies, and cultural diversity. Through these underlying factors, the possibletrade-offs between improving income distribution and good economicperformance might occur.