Inequality and Growth Reconsidered: Lessons from East Asia
Author(s)
Birdsall, Nancy; Ross, David; Sabot, Richard
Abstract
Conventional wisdom has long held that there is a necessary trade-off between increasing economic growth and reducing income inequality in developing economies. However, using cross-economy statistical studies of eight “high-performing East Asian economies” (Hong Kong, Indonesia, Japan, the Republic of Korea, Malaysia, Singapore, Taiwan (China), and Thailand), as well as theoretical analyses and microeconomic studies, the authors challenge this assumption. These East Asian economies achieved rapid economic growth in the last three decades, a remarkably long period for such growth to persist with low and apparently even decreasing levels of income inequality. In fact, their experiences suggest that polices aimed at reducing poverty and income inequality actually stimulate growth, and low income inequality may independently contribute to rapid growth.
