Part of the SpringerBriefs in Business book series (BRIEFSBUSINESS, volume 5)


This chapter provides a recent survey of literature on inequality and economic growth. The contemporary literature suggests that there is a complex relationship between growth and inequality and that the level of initial inequality plays an important role in defining the nature of the causal relationship. The path of the causal relationship between inequality and growth, and vice-versa, remain an area of active research. This chapter summarizes the recent theoretical advancements in this literature and identifies the role of institutions to play in explaining the causal relationship between inequality and growth. It highlights the role of fiscal institutions and emphasizes that inequality by itself is not sufficient to cause slower growth. A dynamic general equilibrium model is developed in the subsequent chapters, and the role of fiscal institutions on growth is assessed using statistical techniques. A Markovian solution is imposed on the structure of the model to overcome the problem of multiple equilibria.


Dynamic general equilibrium Fiscal policy Growth Inequality Institutions Multiple equilibria Political economy Tax game 

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Summit Consulting LLCWashingtonUSA

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