The impact of income inequality on economic growth

Drawing on harmonised data covering the OECD countries over the past 30 years, this chapter first explores whether income inequality has an impact on subsequent growth. In particular, it focuses on the growth consequences of income inequality in different parts of the income distribution, using measures of “top” and “bottom” inequality. The chapter then evaluates the “human capital accumulation theory”, one prominent channel through which inequality is supposed to affect economic growth. Exploiting micro data from the Adult Skills Survey (PIAAC), it looks at the consequences of income inequality for the skills development of individuals with different parental education backgrounds, both in terms of the quantity of education attained (e.g. years of schooling) and in terms of its quality (e.g. skill proficiency).