Wealth inequality and economic growth: Evidence from the World Inequality Database

• Global evidence on the relationship between wealth inequality and economic growth (165 countries, 1995–2019). • 1 SD increase in wealth Gini linked to a 0.34 p.p. drop in annual growth rates. • Causal interpretation supported by system GMM estimates. • Results are highly robust to alternative specifications, inequality measures, and covariate selection techniques. Although it is often argued that wealth inequality matters more for economic growth than income inequality, this relationship has rarely been studied empirically, with a few exceptions covering a very restricted country sample or short timeframe. Leveraging hitherto unexploited wealth inequality data from the World Inequality Database, covering a panel of 165 countries between 1995 and 2019, we document a negative and statistically significant relationship between wealth inequality and economic growth. A one standard deviation increase in the wealth Gini coefficient within countries is associated with a 0.34 percentage points decline in growth rates. Instrumental variables support a causal interpretation of the results. The results survive a large battery of robustness checks, and we find no evidence to suggest a heterogeneous relationship.