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This paper introduces a model in which greater inequality reduces growth in economies with low levels of financial development but that this effect is attenuated in economies with more developed systems. The model also predicts that individuals in economies with developed financial markets have a higher tolerance to inequality. Using a panel dataset that covers a large number of countries, this paper shows empirical evidence that is consistent with the main predictions of the model. Overall, this paper's major findings highlight that some of the pernicious effects of inequality can be attenuated by improving access to credit. [ABSTRACT FROM AUTHOR]

The paper examines the dynamically evolving triangular relationships between institutions, growth and inequality in the process of economic development, in order to deepen the understanding of institutional conditions for pro-poor growth and shared growth. In this context, the paper discusses the institutional conditions found in sub-Saharan Africa, which may have produced the growth pattern that is unequal and against the poor. The analysis shows that sub-Saharan African countries require transforming institutions for embarking upon and sustaining a development path which would ensure shared growth in years to come. The paper first evaluates the growth-inequality-poverty nexus, as found in the recent literature, which increasingly challenges the trade-off between growth and equity, as postulated in the traditional theories. Various definitions of pro-poor growth are discussed and a sharper definition of the concept of ‘shared’ growth is provided. Definitions of institutions are then examined, as well as the triangular inter-relationships between institutions, inequality and poverty. The paper finally analyses specific institutional conditions found in sub-Saharan Africa that prevent economies from emerging out of low-equilibrium poverty traps that are characterized by low economic growth, unequal distribution of income and wealth as well as unequal access to resources and power. [ABSTRACT FROM AUTHOR]

ABSTRACT This paper empirically examines whether human capital defines the association between foreign direct investment (FDI) and income inequality. Rather than focusing on one country or region, we investigate with a broad cross section of countries to address parameter heterogeneity across countries. Using the instrumental variable threshold regressions approach, we find a significant threshold level of human capital, below which FDI exerts a disproportionately positive (negative) impact on the relatively poor (rich) and hence improves income distribution. Beyond this critical level, however, FDI benefits (harms) the nonpoor (nonrich) most and thus exacerbates income inequality. [ABSTRACT FROM AUTHOR]