The relationship between income inequality and economic growth is complex. Some inequality is integral to the effective functioning of a market economy and the incentives needed for investment and growth. But inequality can also be destructive to growth, for example by amplifying the risk of crisis or making it difficult for the poor to invest in education. This paper finds that the duration of growth spells is robustly associated with more equality in the income distribution. Inequality matters, moreover, even when other determinants of growth duration – external shocks, initial income, institutional quality, openness to trade, and macroeconomic stability – are taken into account.
Jonathan D. Ostry
Jonathan D. Ostry, Atish R. Ghosh and Mahvash S. Qureshi
The global financial crisis and its aftermath saw boom-bust cycles in cross-border capital flows of astounding magnitude. Issues of capital account liberalization and the imposition of capital controls are back in the headlines, and on researchers’ agendas. This comprehensive and timely research review covers many of the themes central to the issue of capital account liberalization, and provides a balanced assessment of the role that capital controls might play in the effective management of capital flows to reap their benefits.