Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty

Bagchi, Sutirtha; Svejnar, Jan

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Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty

CEPR Discussion Paper No. DP9788

45 Pages Posted: 2 Jun 2014

See all articles by Sutirtha Bagchi

Sutirtha Bagchi

Villanova University - School of Business - Economics

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA; CEPR; IZA; CERGE-EI; University of Ljubljana

There are 3 versions of this paper

Date Written: January 2014

Abstract

A fundamental question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in tackling the question, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazines listing of billionaires and compare its effect on growth to the effects of income inequality and poverty. We find that wealth inequality reduces economic growth, but when we control for the fact that some billionaires acquired wealth through political connections, the effect of politically connected wealth inequality is negative, while politically unconnected wealth inequality, income inequality, and initial poverty have no significant effect.

Keywords: Billionaires, Economic Growth, Income Inequality, Political Connections, Wealth Inequality

JEL Classification: D31, O40, O43

Suggested Citation: Suggested Citation

Bagchi, Sutirtha and Svejnar, Jan, Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty (January 2014). CEPR Discussion Paper No. DP9788, Available at SSRN: https://ssrn.com/abstract=2444786