A recent report, “Redistribution, Inequality, and Growth,” by the International Monetary Fund (IMF) finds the following:
First, more unequal societies tend to redistribute more. It is thus important in understanding the growth-inequality relationship to distinguish between market and net inequality.
Second, lower net inequality is robustly correlated with faster and more durable growth, for a given level of redistribution. These results are highly supportive of our earlier work.
And third, redistribution appears generally benign in terms of its impact on growth; only in extreme cases is there some evidence that it may have direct negative effects on growth. Thus the combined direct and indirect effects of redistribution — including the growth effects of the resulting lower inequality — are on average pro-growth.