A new study (abstract and free PDF available) authored by several economists at the IMF (International Monetary Fund) reveal an inverse relation between increases in inequality and GDP growth. In what could also be considered a heavy blow to trickle-down economic theory, data analyses show (page 7) that increases of income share on the fifth quintile actually hurt growth, while increases in any other quintile favours growth with the lowest quintile showing the strongest push.
From the abstract:
We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class.
(Score: 3, Insightful) by bradley13 on Friday June 19 2015, @12:37PM
This like from the abstract
"We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth"
is unfortunate. They do analyze all sorts of correlations, and do a creditable job of it. However, as far as I can see, they don't even attempt to establish causation. In the paper itself, they let the correlations speak for themselves.
The conclusions are in typical diplomatic language designed to offend no one. What they seem to be saying, though, is pretty obvious: short-term governmental thinking is counterproductive. Regulatory capture, failure to provide a high-quality educational system, flat-out corruption - these all work to the long-term detriment of a country.
I'm not sure who they expect to benefit from this report. Those in the middle class aren't in a position to do anything with this information; anyway. Corrupt politicians aren't going to change their short-term thinking until they're hung from a long rope. So just who is the intended audience?
Everyone is somebody else's weirdo.
(Score: 2) by bradley13 on Friday June 19 2015, @12:38PM
...erf. even used "preview". Should read "This line from the abstract"
Everyone is somebody else's weirdo.
(Score: 2) by tibman on Friday June 19 2015, @02:25PM
You might be able to apply that same principle to things in your control though. Working for a company with a payscale that adheres to this principle might result in more growth than a company that squeezes it's employees and vastly overpays the executives.
SN won't survive on lurkers alone. Write comments.
(Score: 3, Interesting) by monster on Friday June 19 2015, @04:26PM
The IMF as an institution seems to have an agenda at odds with the results. That would explain the diplomatic language.
(Score: 2) by c0lo on Friday June 19 2015, @07:33PM
You've got me (short-term) thinking now: long-term hanging or short-term hanging?
(grin)
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford