The simultaneous evolution of growth and inequality

Research on inequality and growth can be divided into two strands. One, deriving from Kuznets and Lewis, has tried to identify a mechanistic relationship between growth, or level, of income and inequality. The other has tried to find causal explanations of growth and inequality, treating each independently. In this paper, we draw from both strands to test whether growth and inequality are the joint outcomes of other variables and processes. We find that simultaneous examination of growth and inequality yields significantly different results and has different consequences for policy from previous independent studies.