Wealth Inequality and Economic Growth: Evidence from the World Inequality Database

Although it is often argued that wealth inequality matters more for economic growth than income inequality, this relationship has rarely been studied empirically, with a few exceptions covering a very restricted country sample or short timeframe. Leveraging hitherto unexploited wealth inequality data from the World Inequality Database, covering a panel of 165 countries between 1995 and 2019, we document a negative and statistically significant relationship between wealth concentration at the top of the distribution and economic growth. A one standard deviation increase in wealth inequality within countries is associated with a 0.4 percentage points (17%) decline in growth rates. Instrumental variables support a causal interpretation of the results. The results survive a large battery of robustness checks, and we find little evidence to suggest a heterogeneous relationship.