en.wikipedia.org/wiki/Richard_Florida is currently a professor and head of the Martin Prosperity Institute at the Rotman School of Management at the University of Toronto (not the author of the IMF report)
Pinning down the precise relationship between growth and inequality is a challenge. Some studies reckon inequality is mildly bad for growth. Others suggest the relationship changes as poor countries grow rich, while still others reckon it is the trend in inequality rather than its level that matters.
Research by economists at the International Monetary Fund aims to add clarity to the debate. In a 2011 paper Andrew Berg and Jonathan Ostry argued that it is the duration of spells of growth that is most important for long-run economic performance: getting an economy growing in the first place is much easier than keeping the growth spell rolling. They reckon that when growth falters, inequality is often a culprit. Latin America’s Gini index is about 50, well above that in emerging Asia, which has a Gini of about 40. (A Gini index is a measure of income concentration that ranges from 0, representing perfect equality to 100, where all income flows to a single person.) Were Latin America to close half of that gap in inequality, its typical growth spurt might last twice as long, on average.
Others reckon that it may not be inequality itself that harms growth but rather governments that tax and spend to try to reduce it. In a new paper Messrs Berg and Ostry and Charalambos Tsangarides tease out the separate effects of inequality and redistribution. They turn to a data set put together by Frederick Solt, a political scientist at the University of Iowa, containing Gini indices for 173 economies spanning a period of five decades. Mr Solt provides Ginis for both market income and net income (after taxes and transfers). The difference between the two gives the authors a measure of redistribution (see chart). In America, which does relatively little of it, redistribution trims the Gini index by roughly ten points. In Sweden, in contrast, it cuts the Gini by 23 points—more than half. Using these figures, the economists can separate out the different effects of redistribution and inequality on growth.
Up to a point, spreading the wealth around carries no growth penalty: growth in income per person is not meaningfully lower in countries with more redistribution. But economies that redistribute a lot may enjoy shorter growth spells, the authors reckon. When the gap between the market and net Ginis is 13 points or more (as in much of western Europe) further redistribution shrinks the typical expansion. The authors caution against drawing hasty conclusions. Details surely matter; nationalising firms and doling out profits would presumably be worse for growth than taxing property to fund education.
Inequality is more closely correlated with low growth...
"Inequality and unsustainable growth: Two sides of the same coin?", Andrew Berg and Jonathan Ostry, IMF Staff Discussion Note, April 2011.
"Redistribution, inequality, and growth", Andrew Berg, Jonathan Ostry, and Charalambos Tsangarides, IMF Staff Discussion Note, February 2014.
"Inequality, the Great Recession, and slow recovery", Barry Cynamon and Steven Fazzari, January 2014.