IMF study finds inequality is damaging to economic growth

From The Guardian:

The International Monetary Fund has backed economists who argue that inequality is a drag on growth in a discussion paper [PDF] that has also dismissed rightwing theories that efforts to redistribute incomes are self-defeating.

The Washington-based organisation, which advises governments on sustainable growth, said countries with high levels of inequality suffered lower growth than nations that distributed incomes more evenly.

Backing analysis by the Keynesian economist and Nobel prizewinner Joseph Stiglitz, it warned that inequality can also make growth more volatile and create the unstable conditions for a sudden slowdown in GDP growth.

And in what is likely to be viewed as its most controversial conclusion, the IMF said analysis of various efforts to redistribute incomes showed they had a neutral effect on GDP growth.