Inequality and Growth

3 Credits · Level: Graduate, Undergraduate

The relationship between inequality and growth is complex, allowing for a range of views. Mainstream macroeconomics has traditionally advocated ‘going for growth’, treating inequality essentially as a side issue. This course will discuss evidence on the links between inequality and growth, including the view that high income inequality may impede the sustainability of economic growth. The course will also look at some causes of rising inequality within countries, focusing especially on inequality drivers that are under the control of policy makers: fiscal policy; monetary policy; productivity-enhancing reforms (sometimes called structural policies, designed to raise productivity and growth); and trade and financial openness. Do these policies have a direct impact on income inequality and, if so, to what extent does this impact detract from the growth benefits? The course will begin with some evidence on the growth effects of structural reforms and financial openness, and the patterns of growth in emerging market and developing economies. The course will cover additional issues, including some of the following: how gender diversity can enhance economic growth; how the COVID pandemic may impact income inequality over the medium run; and the extent to which the pandemic may catalyze reforms that could help both growth and equity. When looking at the impact of financial openness on inequality and growth, the course may cover policies to manage volatile capital flows in order to improve equity-efficiency tradeoffs inherent in global financial integration. Prerequisites: intermediate macro or international finance. The course will have as a main textbook Confronting Inequality: How Societies Can Choose Inclusive Growth (Columbia University Press), and several complementary readings published in academic journals or by international organizations. Assessment for the course will likely include a midterm and a final. Class participation will also count.