Editing Economic growth (section)

=== Evidence: mechanisms ===
The [[Galor-Zeira model|Galor and Zeira's model]] predicts that the effect of rising inequality on GDP per capita is negative in relatively rich countries but positive in poor countries.<ref name=":4" /><ref name=":5" /> These testable predictions have been examined and confirmed empirically in recent studies.<ref>{{Cite web|url=https://voxeu.org/article/effects-income-inequality-economic-growth|title=Effects of income inequality on economic growth |last1=Brückner|first1=Markus|last2=Lederman|first2=Daniel|date=2015 |website=VOX CEPR Policy Portal}}</ref><ref>{{Cite journal|last1=Brückner|first1=Markus|last2=Lederman |first2=Daniel|date=2018|title=Inequality and economic growth: the role of initial income|journal=Journal of Economic Growth|volume=23|issue=3|pages=341–366|hdl=10986/29896|hdl-access=free|s2cid=55619830 |url=http://documents.worldbank.org/curated/en/574281528247194319/Inequality-and-economic-growth-the-role-of-initial-income|doi=10.1007/s10887-018-9156-4}}</ref> In particular, Brückner and Lederman test the prediction of the model by in the panel of countries during the period 1970–2010, by considering the impact of the interaction between the level of income inequality and the initial level of GDP per capita. In line with the predictions of the model, they find that at the 25th percentile of initial income in the world sample, a 1 percentage point increase in the Gini coefficient increases income per capita by 2.3%, whereas at the 75th percentile of initial income a 1 percentage point increase in the Gini coefficient decreases income per capita by -5.3%. Moreover, the proposed human capital mechanism that mediates the effect of inequality on growth in the Galor-Zeira model is also confirmed. Increases in income inequality increase human capital in poor countries but reduce it in high and middle-income countries.

This recent support for the predictions of the Galor-Zeira model is in line with earlier findings. Roberto Perotti showed that in accordance with the credit market imperfection approach, developed by Galor and Zeira, inequality is associated with lower level of human capital formation (education, experience, apprenticeship) and higher level of fertility, while lower level of human capital is associated with lower levels of economic growth.<ref name=":8"/> Princeton economist Roland Benabou's finds that the growth process of Korea and the Philippines "are broadly consistent with the credit-constrained human-capital accumulation hypothesis".<ref>{{Cite journal|last=Bénabou |first=Roland|date=1996|title=Inequality and Growth|journal=NBER Macroeconomics Annual|volume=11|pages=11–92|doi=10.1086/654291|s2cid=154145268}}</ref> In addition, Andrew Berg and Jonathan Ostry<ref name=":9" /> suggest that inequality seems to affect growth through human capital accumulation and fertility channels.

In contrast, Perotti argues that the political economy mechanism is not supported empirically. Inequality is associated with lower redistribution, and lower redistribution (under-investment in education and infrastructure) is associated with lower economic growth.<ref name=":8"/>