Tuesday, October 21, 2014

Why, indeed?

Why should policymakers care about economic inequality?

 Carter Price says, Beats me.
In an early survey of the literature, economist Roland Benabou at Princeton University in 1996 found that the vast majority of studies said high and rising inequality harmed economic growth.
 Then, some thought a second time;
In response to this early literature, various economists explored the nuances of this relationship. University of Melbourne economist Sarah Voitchovsky summarizes much of this middle literature in a 2009 review, finding that there was substantial disagreement about the relationship between inequality and growth. Some studies showing that inequality may improve growth under certain circumstances.
 On the third hand;
The muddle of this middle period in this economic literature has given rise to a newer narrative. Methodological differences appear to have driven the differences in the results, with later analysis finding that higher inequality can be associated with faster economic growth in the short term, but over time higher inequality is related to lower growth.
Recent work by International Monetary Fund economists Andrew Berg, Jonathan Ostry, and Charalombos Tsangaridis as well as by Roy van der Weide of the World Bank and Branko Milanovic of the City University of New York have robustly found a negative relationship between economic inequality for developed countries and within the United States, respectively.
Or not;
This most recent wave of studies will likely not be the final word on the relationship between economic inequality and growth. Furthermore, there is substantial work needed to understand how inequality affects growth.
But that won't stop the inequalityphobes from doing something...anything...to end this...something.

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