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For immediate release: January 15, 2008

Inequality and Growth Examined in Dallas Fed’s Economic Letter

DALLAS—Income inequality is more detrimental to economic growth in countries where markets function poorly, according to the January issue of the Federal Reserve Bank of Dallas' Economic Letter.

In “Inequality and Growth: Challenges to the Old Orthodoxy,” senior economist and policy advisor Erwan Quintin and senior economist Jason L. Saving report that countries with weak institutions for the exchange of goods, services and money are more likely to experience disruptions in resource allocation due to inequality.

“This suggests that dealing with these deficiencies—for example, by better protecting property rights and removing obstacles to financial development—is a key step toward economic development and poverty reduction,” the authors write.

A lack of data on wealth inequality in both industrialized and developing nations has hindered efforts aimed at understanding the link between inequality and growth, according to Quintin and Saving.


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