Don’t Listen To The Rich: Inequality Is Bad For Everyone
Chris Doucouliagos, 9 Aug 17
       

Having only a few people with most of the wealth, motivates others. This theory is actually wrong according to research. Aakkosia sosialistien lapsille (1912)/Flickr, CC BY-SA

A world where a few people have most of the wealth motivates others who are poor to strive to earn more. And when they do, they’ll invest in businesses and other areas of the economy. That’s the argument for inequality. But it’s wrong.

Our study of 21 OECD countries over more than a 100 years shows income inequality actually restricts people from earning more, educating themselves and becoming entrepreneurs. That flows on to businesses who in turn invest less in things like plant and equipment.

Inequality makes it harder for economies to benefit from innovation. However, if people have access to credit or the money to move up, it can offset this effect.

We measured the impact of this by looking at the number of patents for new inventions and then also looking at the Gini coefficient and the income share of the top 10%. The Gini coefficient is a measure of the distribution of income or wealth within a nation.

How inequality reduces innovation

From 1870 to 1977, inequality measured by the Gini coefficient fell by about 40%. During this time people actually got more innovative and productivity increased, incomes also increased.

But inequality has increased in recent decades and it’s having the opposite effect.

Sign in to view full article

       
Is Violent Political Protest Ever Justified?
The mass protests against Donald Trump’s election, inauguration, and executive actions might subside – but based on the scale and ...
Christopher J. Finlay
Thu, 30 Mar 17
Letter from Former Insider at Chinese Hospital Reports Detail About Organ Harvesting
A foreign patient receives a life-extending organ transplant in a Chinese hospital. Feeling grateful, he asks a hospital staff member ...
Epoch Times Staff
Mon, 2 Jan 17
From ‘White Flight’ to ‘Bright Flight’ – The Looming Risk for Our Growing Cities
If the growth of cities in the 20th century was marked by “white flight”, the 21st century is shaping up ...
Jason Twill
Fri, 19 May 17
Why are We More Likely to Get Cancer as We Age?
This article is part of our series on older people’s health. It looks at the changes and processes that occur ...
Stuart Pitson
Wed, 1 Feb 17
The Economics Behind Uber’s New Pricing Model
Uber is changing the way it calculates fares, moving to a system that charges what customers are “willing to pay”, ...
Jordi McKenzie
Thu, 1 Jun 17
Advertise with Us
An Epoch Times Survey
Join us today!
Sports Elements
Read about Forced Organ Harvesting
Sports Elements