The Association between Wealth Inequality and Socioeconomic Outcomes

stack of coins with a clock in the background

As economic inequality has drastically increased in recent decades, scholars fear the threat that these disparities pose to general prosperity.

Notably, while researchers have considered how rising income inequality may lead to certain socioeconomic outcomes–such as its effects on employment and labor participation, higher education achievements, life expectancy, and so forth–few have investigated the role that wealth inequality may play. Given the greater magnitude of wealth inequality currently prevalent–and wealth’s qualities as a more stable indicator of status and comfort (or a lack thereof)–it is reasonable to assume wealth disparities may have a similar, or even greater, effect on socioeconomic outcomes.

This new paper from Cook Center researchers, published in the American Economic Association’s Papers and Proceedings, explores these connections between wealth inequality and varied socioeconomic outcomes.

Abstract

We investigate whether inequality in wealth distribution is broadly associated with adverse socioeconomic outcomes across countries. There are few studies that investigate these relationships, likely due to data limitations. On the other hand, a substantial body of work suggests that income inequality correlates with undesirable outcomes. This paper evaluates the relationship between measures of wealth inequality and a number of outcomes across countries in a unified estimation framework that circumvents publication bias. While we fail to find support for a broad negative association, we do find a negative correlation between wealth inequality and institutional quality.

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