Does Equality Reduce Growth? A Theoretical Justification

Universidad de Cantabria Working Paper No. 5/02

22 Pages Posted: 7 Jun 2002

See all articles by Blanca Sanchez-Robles

Blanca Sanchez-Robles

UNED, Departamento de Análisis Económico

Abstract

This paper designs a simple model that intends to explain theoretically a strange empirical regularity documented by some researchers: more equality reduces growth in rich countries. The main point of the model is to include equality as an argument that increases utility of the representative agents. The model does predict a negative link between equality and growth. The intuition is as follows: more public funds devoted to social programs intended to reduce inequality may crowd out other productive activities, thus damaging per capita growth. In other words, an excessive level of equality in society (especially if it is achieved by Social Welfare programs) may not be optimal from the point of view of growth.

Keywords: equality, economic growth, public expenditure

JEL Classification: 04-05

Suggested Citation

Sanchez-Robles, Blanca, Does Equality Reduce Growth? A Theoretical Justification. Universidad de Cantabria Working Paper No. 5/02, Available at SSRN: https://ssrn.com/abstract=315021 or http://dx.doi.org/10.2139/ssrn.315021

Blanca Sanchez-Robles (Contact Author)

UNED, Departamento de Análisis Económico ( email )

Paseo de la Senda del Rey 11
MADRID, Madrid 28040
Spain

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