Does Tackling Inequality Reduce Growth? No

In the ongoing debate about rising income inequality, two questions are often raised: one from the left—Is rising inequality impeding economic growth? And the other from the right: Does tackling inequality, which usually involves some form of redistribution, reduce growth?

The questions reflect differing concerns and differing world views. In his 2012 book, “The Price of Inequality,” Joseph Stiglitz, the liberal Columbia economist, argued that recent trends in income distribution threatened not just economic growth but the very fabric of democracy. On the other side of the ideological divide, conservative economists claim that tackling inequality—by, for instance, raising taxes on the rich and using it to finance government programs for the poor—has adverse effects on incentives and restricts growth, which is counterproductive for everybody.

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