Work

Wealth Inequality and Economic Growth

Year: 2026

Type: article

Abstract: From the perspective of the increasing marginal tendency toward tax avoidance, this paper proves that groups with higher wealth levels possess stronger willingness and capacity for tax avoidance, which continuously widens the wealth gap. As wealth inequality keeps worsening, it is bound to exert profound impacts on economic growth. This paper further sorts out three transmission channels through which wealth inequality affects economic growth: increasing returns to scale of physical capital investment, erosion of fiscal tax bases, and accumulation of per capita human capital. These three channels jointly generate a nonlinear impact of wealth inequality on economic growth. Based on an unbalanced cross-country panel dataset, this paper adopts the income Gini coefficient lagged by 20 years as the instrumental variable for the wealth Gini coefficient, and incorporates core variables involved in the theoretical model for empirical research. The empirical results are consistent with theoretical deductions. Unlike existing studies that only conclude a negative correlation between the two variables, this paper identifies an inverted U-shaped effect of wealth inequality on economic growth, offering new considerations for policy design by social planners.

Source: Economies

DOI: 10.3390/economies14090365

Authors: Zixiang Qi, Yaxin Wang

Institutions: Beijing Wuzi University, University of Chinese Academy of Social Sciences

Language: English

Topic: Income, Poverty, and Inequality

Subfield: Sociology and Political Science

Field: Social Sciences

Domain: Social Sciences

SDGs: Reduced inequalities, Decent work and economic growth

Open Access status: gold

Estimated APC paid: $2,172