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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]

Current growth literature does not explain the inability of poor countries to utilize existing knowledge. This study presents a stylized development model based on firms' expansion through on-the-job training. Since trained workers can supervise and train more workers, a development process in which output and productivity increase up to a full utilization of existing technology is generated. Unlike schooling-based models, which require an assumption regarding a smaller local stock of knowledge, this study relies on the size of the industrial sector and the limited supply of training opportunities, therefore highlights barriers to development, even when technology and capital are available. ( JEL O1, O4, J2) [ABSTRACT FROM AUTHOR]

We investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation, using an annual panel of U.S. state-level data. Our analysis is based upon the 'unified' framework offered by Galor and Moav (2004) while the empirics account for cross-section dependence, parameter heterogeneity, and endogeneity, in nonstationary series. We conclude that changes in inequality do not influence growth, neither in the short run nor in the long run in the United States as a whole in the 1929-2013 period. Our findings are robust to the inclusion of overall income inequality measures. These findings provide support for the theoretical prediction of the unified theory of inequality and growth, according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the United States experiences during our period of investigation. Therefore, future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the United States. ( JEL I21, O47, C23) [ABSTRACT FROM AUTHOR]