Inequality of Opportunity and Economic Growth: A Cross-Country Analysis

40 Pages Posted: 10 Jan 2017

See all articles by Francisco H. G. Ferreira

Francisco H. G. Ferreira

World Bank - Development Research Group (DECRG)

Christoph Lakner

World Bank - Development Research Group (DECRG); University of Oxford - Department of Economics

Maria Ana Lugo

World Bank

Berk Ozler

World Bank - Development Economics Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2014

Abstract

Income differences arise from many sources. While some kinds of inequality, caused by effort differences, might be associated with faster economic growth, other kinds, arising from unequal opportunities for investment, might be detrimental to economic progress. This study uses two new metadata sets, consisting of 118 household surveys and 134 Demographic and Health Surveys, to revisit the question of whether inequality is associated with economic growth and, in particular, to examine whether inequality of opportunity -- driven by circumstances at birth -- has a negative effect on subsequent growth. The results are suggestive but not robust: while overall income inequality is generally negatively associated with growth in the household survey sample, we find no evidence that this is due to the component associated with unequal opportunities. In the Demographic and Health Surveys sample, both overall wealth inequality and inequality of opportunity have a negative effect on growth in some of the preferred specifications, but the results are not robust to relatively minor changes. On balance, although the results are suggestive of a negative association between inequality and growth, the data do not permit robust conclusions as to whether inequality of opportunity is bad for growth.

Keywords: Inequality, Equity and Development, Poverty Impact Evaluation, Services & Transfers to Poor, Achieving Shared Growth

Suggested Citation

Ferreira, Francisco H. G. and Lakner, Christoph and Lugo, Maria Ana and Ozler, Berk, Inequality of Opportunity and Economic Growth: A Cross-Country Analysis (June 1, 2014). World Bank Policy Research Working Paper No. 6915. Available at SSRN: https://ssrn.com/abstract=2895392

Francisco H. G. Ferreira (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Washington, DC 20433
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202-473-4382 (Phone)

Christoph Lakner

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

HOME PAGE: http://www.worldbank.org/en/about/people/christoph-lakner

University of Oxford - Department of Economics

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

Maria Ana Lugo

World Bank ( email )

Berk Ozler

World Bank - Development Economics Research Group (DECRG) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/bozler

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