Poverty and income inequality

Markus Brückner, Daniel Lederman, 07 July 2015

The relationship between aggregate output and income inequality is central in macroeconomics. This column argues that greater income inequality raises the economic growth of poor countries and decreases the growth of high- and middle-income countries. Human capital accumulation is an important channel through which income inequality affects growth. 

Henri De Groot, Gerard Marlet, Coen Teulings, Wouter Vermeulen, 21 June 2015

Only a few decades ago many talked about the ‘death of cities’. Today, many cities have emerged as hubs of economic activity. This column argues such a phenomenon is due to spill-overs and agglomeration of human capital. The popularity of certain cities is explained by their attractiveness for innovative enterprises and high-educated top talent. But since locations where top talent clusters are scarce, land rents on these locations are high.

Ravi Kanbur, Adam Wagstaff, 10 June 2015

Reducing inequality of opportunity, rather than inequality of outcome, is often heralded as an appropriate target for policy. This column explores the challenges of identifying inequality of opportunity. Disentangling how effort and circumstance contribute to outcomes is difficult, and this leads to a tendency to underestimate inequality of opportunity. This lends support for generalised social protection measures in dimensions such as income, health and education, irrespective of whether the outcomes can be specifically attributed to circumstance or to effort.

Chie Aoyagi, Giovanni Ganelli, Kentaro Murayama, 03 June 2015

Income inequality in Japan has been growing over the past few decades. This column discusses the macroeconomic significance of inclusive growth and its role in the ultimate success of Abenomics. The findings suggest that full implementation of structural reforms – including launching the third arrow of Abenomics – would be necessary to foster growth and increase equality. 

Melissa S. Kearney, Phillip B. Levine, 28 May 2015

Compared to other developed countries, the US ranks high on income inequality and low on social mobility. This could be particularly concerning if such a trend is self-perpetuating. In this column, the authors argue that there is a causal relationship between income inequality and high school dropout rates among disadvantaged youth. In particular, moving from a low-inequality to a high-inequality state increases the likelihood that a male student from a low socioeconomic status drops out of high school by 4.1 percentage points. The lack of opportunity for disadvantaged students, therefore, may be self-perpetuating.

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