There is considerable theoretical and empirical evidence to support the assertion that inequality is bad for growth. In unequal societies it is much harder to develop the institutions, norms, mores and conventions required for economic growth. In addition, social mobility slows to a crawl in unequal societies. This undermines the incentives for hard work and effort and weakens the human potential of a country. Inequality also damages human capital formation in ways that are hard to repair.
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Written by Kuben Naidoo, an expert on economic and development policy who has held various senior positions in the South African government since 1994 including in the Treasury and in the National Planning Commission.
This article was first published on the Econ3x3 website – Accessible policy-relevant research and expert commentaries on unemployment and employment, income distribution and inclusive growth in South Africa.
Reducing inequality to promote growth: A proposed policy package0.09 MB