Inequality does Cause Underdevelopment: New evidence By William Easterly Center for Global Development - Institute for International Economics Working Paper No.1, January 2002 Available online as PDF file [36p.] at: http://www.cgdev.org/wp/wp001.pdf "..........This paper argues that the conflicting results in the voluminous recent literature on inequality and growth are missing the big picture on inequality and long-run economic development. Consistent with the provocative hypothesis of Engerman and Sokoloff 1997 and Sokoloff and Engerman 2000, this paper confirms with cross-country data that commodity endowments predict the middle class share of income and the middle class share predicts development. The use of commodity endowments as instruments for middle class share addresses problems of measurement and endogeneity of inequality. The paper tests the mechanisms - institutions, redistributive policies, and schooling - by which the literature has argued that a higher middle class share raises per capita income. It tests the inequality hypothesis for institutional quality, redistributive policies, and schooling against other recent hypotheses in the literature. The results were subjet to testing for over-identifying restrictions, reverse causality, and other checks for robustness. While finding some evidence consistent with other development fundamentals, the paper finds high inequality to independently be a large and statistically significant barrier to developing the mechanisms by which prosperity is achieved....." This message from the Division of Health and Human Development, PAHO/WHO, is part of an effort to disseminate information related to Equity, Health inequality; socioeconomic inequality in health; socioeconomic health differentials. Gender, Violence, Poverty, Health Economics, Health Legislation, Ethnicity, Ethics, Information Technology and Virtual Libraries, Research & Science issues. -------------------------------------------------------------------------------- PAHO/WHO Website: http://www.paho.org/English/HDP/equidad-list-about.htm EQUIDAD List - Archives: http://listserv.paho.org/Archives/equidad.html