Inequality, inequality of opportunity, and growth: what are we talking about? Theory and empirical investigation in Brazil

Produced by: 
Université Paris 1 Panthéon-Sorbonne
Available from: 
June 2013
Paper author(s): 
Geoffrey Teyssier (Université Paris 1 Panthéon-Sorbonne)
Topic: 
Macroeconomics and Monetary Policy
Poverty - Inequality - Aid Effectiveness
Year: 
2013

Building on the existing literature, a synthetic approach intended to ease the understanding of the notion of inequality of opportunity is developed. In turn, this paper tests a convincing hypothesis explaining the mixed evidence found by empirical studies regarding the instrumental effect of inequality on growth: income inequality would in fact be a composite measure of inequality of opportunity, which is expected to be detrimental to growth, and of inequality effort, which is expected to be beneficial; the effect of total income inequality would then depend on which sort of inequality dominates. This hypothesis, already confirmed by Marrero and Rodríguez (2012) in the US, needs to be validated in other countries and on different samples in order to gain legitimacy. This paper consequently replicates the benchmark regressions from Marrero and Rodríguez (2012) in an emerging economy, namely Brazil. The results are in complete contradiction with those found in the US: neither inequality of opportunity nor inequality of effort have a significant impact on growth, whatever the econometric specification used.

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