Income inequality: An ethical, moral problem or a macroeconomic problem?

There are two ways to look at high income inequality: As an ethical or moral problem, given attitudes against poverty and against a minority of individuals dominating the income distribution ; As a macroeconomic problem: high income inequality can slow growth, because: A thriving middle class is necessary to ensure there is sufficient demand for new goods and services; High income inequality before redistribution leads to large-scale redistributive policies, the financing of which increases the tax burden and creates distortions that reduce employment; But it is also argued that income inequality creates the necessary incentives for growth, an d that it results from the success of innovative entrepreneurs. Across OECD countries, we compare income inequality ( before and after redistribution) with growth , the employment rate, the tax burden , spending on R&D and the size of the new technologies sector . We find that income inequality is not correlated with growth , although a high employment rate and significant spending on R&D do reduce inequality and the correction of inequality increases the tax burden. The primary reason to reduce inequality is therefore moral or ethical and not macroeconomic.