If greater inequality results in greater saving which leads to greater investment and growth, then government policies which increase inequality promote growth; this is called the antiequality argument. If, however, greater equality produces more consumption which drives investment and growth, then increasing equality produces growth; this is the pro-equality argument. This essay tests the assumptions behind the anti- and pro-equality arguments. These assumptions are tested using a Two Stage Least Squares procedure on household and corporate data for Korea between 1963 and 1980.
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