What is the relationship between economic growth and equality? Does economic growth create more or less equality?
More often than not economic growth will increase wealth and income inequality. This is because wealth is not uniformly distributed across the population, with a small percentage controlling a large share of the worlds wealth.
This small percentage of people tend to hold wealth in income-generating assets such as shares in top companies. This means that when the economy is during well and experience high economic growth, companies will be making a lot of profit. This profit is then paid out to their shareholders. This can increase inequality.
However, it's possible for government policies to break the link between economic growth and rising inequality. One way governments do this is with progressive taxes, where people with a higher income also face a higher tax rate. Another policy is inheritance tax rich limits the ability of rich parents passing on their wealth onto their children