Working Papers, Department of Economics, Lund University
Inequality and Growth: The Role of Beliefs and Culture
Abstract: Governments perpetually align their policies to satisfy
shifts in voters' relative demand for economic growth versus social
equality. Following such shifts, increases (decreases) in government
interventions lower (raise) both inequality and growth. This mechanism
generates a positive co-movement between inequality and growth. The pattern
is weaker in countries where a culturally determined belief that the rich
are deserving renders equality a less important objective in the first
place. I develop this analytical result in the theoretical framework of
Alesina and Angeletos (2005), and I provide robust empirical support for it
in a panel of 38 countries over the period 1964-2004.
Keywords: culture; inequality; growth; (follow links to similar papers)
JEL-Codes: O15; O40; P16; Z10; (follow links to similar papers)
43 pages, April 24, 2013
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