Title
Income Inequality, Taxation, and Growth
Document Type
Article
Publication Title
Atlantic Economic Journal
Publication Date
12-1-2010
Abstract
Much recent theoretical and empirical research has focused on the relationship between income distribution and economic growth. The fiscal policy approach argues that inequality is linked to pressure for redistributionary taxation, leading to low capital investment and, therefore, growth. Empirical analyses are consonant with this view in that the long-run relationship between inequality and growth is negative. However, several empirical inconsistencies with the fiscal policy approach do emerge: (a) there exists a short-run, positive relationship between income inequality and growth and (b) the relationship between inequality and taxation is mixed, at best. This paper presents a simple theoretical model that reconciles the intuitively appealing fiscal policy approach with the empirical findings. © 2010 International Atlantic Economic Society.
Volume
38
Issue
4
First Page
417
Last Page
428
DOI
10.1007/s11293-010-9244-0
Recommended Citation
Kula, M., & Millimet, D. (2010). Income Inequality, Taxation, and Growth. Atlantic Economic Journal, 38 (4), 417-428. https://doi.org/10.1007/s11293-010-9244-0
ISSN
01974254
