Editing Economic growth (section)

=== Evidence: reduced form ===
The reduced form empirical relationship between inequality and growth was studied by Alberto Alesina and Dani Rodrik, and Torsten Persson and Guido Tabellini.<ref name=":6" /><ref name=":7" /> They find that inequality is negatively associated with economic growth in a cross-country analysis.

[[Robert Barro]] reexamined the reduced form relationship between inequality on economic growth in a panel of countries.<ref>{{cite journal|last=Barro|first=Robert J.|year=2000|title=Inequality and Growth in a Panel of Countries|journal=Journal of Economic Growth|volume=5|issue=1|pages=5–32|doi=10.1023/A:1009850119329|s2cid=2089406}}</ref> He argues that there is "little overall relation between income inequality and rates of growth and investment". However, his empirical strategy limits its applicability to the understanding of the relationship between inequality and growth for several reasons. First, his regression analysis control for education, fertility, investment, and it therefore excludes, by construction, the important effect of inequality on growth via education, fertility, and investment. His findings simply imply that inequality has no direct effect on growth beyond the important indirect effects through the main channels proposed in the literature. Second, his study analyzes the effect of inequality on the average growth rate in the following 10 years. However, existing theories suggest that the effect of inequality will be observed much later, as is the case in human capital formation, for instance. Third, the empirical analysis does not account for biases that are generated by reverse causality and omitted variables.

Recent papers based on superior data, find negative relationship between inequality and growth. Andrew Berg and Jonathan Ostry of the [[International Monetary Fund]], find that "lower net inequality is robustly correlated with faster and more durable growth, controlling for the level of redistribution".<ref name=":9">{{Cite journal|last1=Berg|first1=Andrew|last2=Ostry|first2=Jonathan D.|last3=Tsangarides|first3=Charalambos G.|last4=Yakhshilikov |first4=Yorbol|date=2018|title=Redistribution, inequality, and growth: new evidence|journal=Journal of Economic Growth|volume=23|issue=3|pages=259–305|doi=10.1007/s10887-017-9150-2|s2cid=158898163}}</ref> Likewise, Dierk Herzer and Sebastian Vollmer find that increased income inequality reduces economic growth.<ref>{{cite journal|last1=Herzer|first1=Dierk|last2=Vollmer|first2=Sebastian|year=2013|title=Rising top incomes do not raise the tide|journal=Journal of Policy Modeling|volume=35|issue=4|pages=504–19|doi=10.1016/j.jpolmod.2013.02.011}}</ref>