Question

Microeconmics:

Empirically, what has been the association between inequality and efficiency?

Answer 1

OECD, IMF and World Bank have been publishing the reports that show the relationship between economic performance, efficiency and equality. The study has found that there is a positive association between equality and efficiency of economic performance. It means that there is a negative association between inequality and efficiency. It happens, because, inequality cause, bigger control of resources in a few hands and rest of the population don't have enough funds to spend. It brings inefficiency. It establishes the fact that growing inequality leads to decreasing level of efficiency.