Relationship between Intergenerational mobility (IGM) and economic growth: Evidence from cross-country data

Authors

Swapnil Landge, CUNY Graduate CenterFollow

Document Type

Article

Publication Date

2022

Abstract

Inequality of opportunity (IGM) is a major cause of inequality of opportunity in many countries. However, the impact of IGM on economic growth has not been fully explored. In this research project, I first replicated and extended the IMF working paper titled IGM, IGM, and Economic Growth’ by Shekhar Aiyar and Christian Ebeke (2019), which explored the relationship between income inequality and economic growth, utilizing various measures of intergenerational mobility, to confirm that the adverse impact of income inequality on growth is more pronounced when IGM is lower. Then, I used the latest Gini dataset (All the Ginis’) compiled by Branko Milanovic (2019 version). The findings of this paper highlight that reducing inequality can significantly boost a country’s growth, particularly in economies with high inequality of chance (characterized by higher Intergenerational Mobility or low intergenerationally persistence). In countries with low IGM (i.e., higher income elasticity), income inequality more significantly hampers the nation’s economic growth. Therefore, policymakers must not only address income inequality in isolation but also tackle the fundamental causes of inequality.