TY  - JOUR
AU  - Banerjee,Abhijit V.
AU  - Duflo,Esther
TI  - Inequality and Growth: What Can the Data Say?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7793
PY  - 2000
Y2  - July 2000
UR  - http://www.nber.org/papers/w7793
L1  - http://www.nber.org/papers/w7793.pdf
N1  - Author contact info:
Abhijit Banerjee
MIT
Department of Economics
E52-252d
50 Memorial Drive
Cambridge, MA 02142-1347
Tel: 617/253-8855
Fax: 617/253-1330
E-Mail: banerjee@mit.edu

Esther Duflo
Department of Economics
MIT, E52-252G
50 Memorial Drive
Cambridge, MA 02142
Tel: 617/258-7013
Fax: 617/253-6915
E-Mail: eduflo@mit.edu
AB  - This paper describes the correlations between inequality and the growth rates in cross-country data.  Using non-parametric methods, we show that the growth rate is an inverted U-shaped function of net changes in inequality: Changes in inequality (in any direction) are associated with reduced growth in the next period.  The estimated relationship is robust to variations in control variables and estimation methods.  This inverted U-curve is consistent with a simple political economy model, although, as we point out, efforts to interpret this model causally run into difficult identification problems.  We show that this non-linearity is sufficient to explain why previous estimates of the relationship between the level of inequality and growth are so different from one another.
ER  -