Top-end inequality and growth: Empirical evidence

New series of the top 1% income shares in 23 countries are used to investigate the relationship between top-end inequality and subsequent economic growth from the 1920s to the 2000s. The association is studied using different time-period specifications, with a focus on data averaged over 5- and 10-year periods. To address the issue related to chosen functional forms, penalized spline methods are exploited to allow for nonlinearities. Empirical evidence suggests that the association between top-end inequality and growth can be linked to the level of economic development. The main findings relate to currently “advanced” countries: the results show a negative relationship between top-end inequality and subsequent growth in many settings, but the findings also suggest that this association may become weaker in the course of economic development. “Lessadvanced” countries need to be studied further when more data become available