The Unassuming Economist

Source: VoxEU CEPR

“Rising inequality and firms’ market power pose challenges to the aims of inclusive growth and shared prosperity. Nevertheless, growth and equity need not be mutually exclusive. This column argues that economic dynamism is crucial for achieving sustained growth and more equal market outcomes (Figure 1). It shows that countries that experienced faster growth over the last four decades have lower market inequality in the 2010s. Policy should be aimed at supporting sophisticated export industries, fostering innovation and creative destruction, and promoting competition.“

Figure 1: Relationship between long-run economic growth and market inequality (1974-2014)