Is there a “double bonus” from reducing inequality?

an article by Akihito Asano (Sophia University, Tokyo) published in Economic Inquiry Volume 50 Issue 2 (April 2012)

Abstract

We study the effect of inequality on growth in an overlapping generations (OLG) model where inequality affects growth through accumulation of human capital and endogenous fertility. In contrast to much of the existing literature, we argue that the effect of inequality on growth might be non-monotonic.

Our model suggests that the effect depends on the demographic stage of development: inequality impedes growth in low-fertility (high human capital) economies, but enhances growth in high-fertility (low human capital) economies.

Our finding casts doubt on a “double bonus” from reducing inequality in developing countries which are typically characterized by high fertility.

JEL codes: J13, O15, O40