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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.


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  • (Score: 3, Informative) by M. Baranczak on Friday June 19 2015, @01:55PM

    by M. Baranczak (1673) on Friday June 19 2015, @01:55PM (#198222)
    You're basically just restating the "trickle-down" theory, which has been shown to be bogus. The economy was booming in the 90s, and inequality was growing like never before.
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  • (Score: 1) by khallow on Friday June 19 2015, @07:37PM

    by khallow (3766) Subscriber Badge on Friday June 19 2015, @07:37PM (#198387) Journal

    The economy was booming in the 90s, and inequality was growing like never before.

    Which is an odd thing to say since global wage and wealth inequality declined over the period of time in question. I find this sort of discussion a bit like deciding to stop breathing because it's uncomfortable to breathe, rather than wondering if maybe the out of control fire in your room may be the source of the problem. There is a huge transfer of economic power from the developed world to the rest of the world, due in large part to increasingly poor policies and attitudes in the developed world. Crippling your economy in order to make income inequality worse doesn't strike me as a productive way to go about these things.

    Instead, we should be looking at how to make the developed world more competitive with respect to the rest of the world.

    • (Score: 0) by Anonymous Coward on Friday June 19 2015, @08:44PM

      by Anonymous Coward on Friday June 19 2015, @08:44PM (#198417)

      You are addressing the global situation when the comment was about the US. The global average for inequality has gotten better, but there is actually worse inequality happening in most countries. You are mixing the situations to fit your view. There is no way the developed economies could become "competitive" with those still developing, that is simple accounting. Well, unless regulatory action evens the currency field... Without the crippling of developed economies through outsourcing there would not have been the global increase you speak of, at least not to the same degree. Also, the crippling you speak of was done by the financial elite to benefit themselves.

      • (Score: 1) by khallow on Saturday June 20 2015, @01:50PM

        by khallow (3766) Subscriber Badge on Saturday June 20 2015, @01:50PM (#198663) Journal

        You are addressing the global situation when the comment was about the US.

        Yes, I ignored a provincial viewpoint. What of it?