Does Wealth Distribution and the Source of Wealth Matter for Economic Growth? Inherited v. Uninherited Billionaire Wealth and Billionaires’ Political Connections

25 Pages Posted: 22 Jul 2015

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

Date Written: December 11, 2014

Abstract

A key question in social sciences relates to the effect of wealth inequality on economic growth. Yet, in analyzing this issue, researchers have had to use income as a proxy for wealth. We derive a global measure of wealth inequality from Forbes magazine’s listing of billionaires and decompose it into three components: inequality resulting from entrepreneurs who used political connections in generating wealth, entrepreneurs who did not use such connections, and those who inherited wealth. We compare the effect of these three components of wealth inequality on growth to the effects of income inequality and poverty and find that the growth effects of self-made politically connected and inherited wealth inequality are negative, while self-made politically unconnected wealth inequality, income inequality, and initial poverty have no significant effect.

Keywords: Economic Growth; Wealth Inequality; Income Inequality, Billionaires, Entrepreneurship, Political Connections.

JEL Classification: D31, O40, O43

Suggested Citation

Bagchi, Sutirtha and Svejnar, Jan, Does Wealth Distribution and the Source of Wealth Matter for Economic Growth? Inherited v. Uninherited Billionaire Wealth and Billionaires’ Political Connections (December 11, 2014). Available at SSRN: https://ssrn.com/abstract=2633559 or http://dx.doi.org/10.2139/ssrn.2633559

Sutirtha Bagchi (Contact Author)

Villanova University - School of Business - Economics ( email )

United States

HOME PAGE: https://sites.google.com/site/sutirthabagchi/

Jan Svejnar

School of International and Public Affairs, Columbia University, NY, USA ( email )

420 West 118th Street
New York, NY 10027
United States

CEPR

London
United Kingdom

IZA

P.O. Box 7240
Bonn, D-53072
Germany

CERGE-EI

P.O. Box 882
7 Politickych veznu
111 21 Prague 1, Prague
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

University of Ljubljana ( email )

Dunajska 104
Ljubljana, 1000
Slovenia

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