The paper assesses the impact of overall inequality, as well as inequality among the poor and among the rich, on the growth rates along various percentiles of the income distribution. The analysis uses micro-census data from U.S. states covering the period from 1960 to 2010. The paper finds evidence that high levels of inequality reduce the income growth of the poor and, if anything, help the growth of the rich. When inequality is deconstructed into bottom and top inequality, the analysis finds that it is mostly top inequality that is holding back growth at the bottom.
van der Weide, R.; Milanovic, B. Inequality is bad for growth of the poor (but not for that of the rich). The World Bank, Washington DC, USA (2014) 38 pp. [World Bank Policy Research Working Paper No. 6963]