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posted by cmn32480 on Friday June 19 2015, @11:27AM   Printer-friendly
from the spread-the-money-around dept.

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.


Original Submission

 
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  • (Score: 3, Insightful) by bradley13 on Friday June 19 2015, @12:37PM

    by bradley13 (3053) on Friday June 19 2015, @12:37PM (#198198) Homepage Journal

    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?

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  • (Score: 2) by bradley13 on Friday June 19 2015, @12:38PM

    by bradley13 (3053) on Friday June 19 2015, @12:38PM (#198199) Homepage Journal

    ...erf. even used "preview". Should read "This line from the abstract"

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  • (Score: 2) by tibman on Friday June 19 2015, @02:25PM

    by tibman (134) Subscriber Badge on Friday June 19 2015, @02:25PM (#198241)

    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.

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  • (Score: 3, Interesting) by monster on Friday June 19 2015, @04:26PM

    by monster (1260) on Friday June 19 2015, @04:26PM (#198300) Journal

    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

    by c0lo (156) Subscriber Badge on Friday June 19 2015, @07:33PM (#198384) Journal

    Corrupt politicians aren't going to change their short-term thinking until they're hung from a long rope.

    You've got me (short-term) thinking now: long-term hanging or short-term hanging?
    (grin)

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