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Old September 4th, 2011, 08:46 PM   #9 (permalink)
OutofDate1980
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"Inequality: A Significant Hazard to Growth Sustainability
The key result from the joint analysis is that income distribution survives as one of the most robust and important factors associated with growth duration. As Figure 3 demonstrates, a 10-percentile decrease in inequality—the sort of improvement that a number of countries have experienced during their spells—increases the expected length of a growth spell by 50 percent. Remarkably, inequality retains a similar statistical and economic significance in the joint analysis despite the inclusion of many more possible determinants. This suggests that inequality seems to matter in itself and is not just proxying for other factors. Inequality also preserves its significance more systematically across different samples and definitions of growth spells than the other variables. Inequality is thus a more robust predictor of growth duration than many variables widely understood to be central to growth."

"The measure of inequality is the Gini coefficient, which varies from 0 (all households have the same income) to 100 (all income received by one household)."
http://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf

Per this IMF paper inequality is not the only factor which effects the durability of growth, but is a significant factor. It appears it is more important over time, say 20-30 years. Income equality need not be perfect, but a GINI coefficient of 46 and above appears to be the tipping point (Figure 2). In 2007 GINI index for the US=45.0
http://www.photius.com/rankings/economy/distribution_of_family_income_gini_index_2011_0.ht ml
(SOURCE: CIA World Factbook 2011)
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Last edited by OutofDate1980; September 4th, 2011 at 08:48 PM. Reason: Formatting
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