An Empirical Test of the Institutionalist View on Income Inequality

This paper analyzes the relationship between income inequality and economic growth within the United States using state level data. It describes income inequality in the U.S. since 1960, then employs a two‐step causal model to test the institutionalist contention that income inequality leads to socio‐political instability, which has a negative impact on economic progress. The empirical results offer support for the institutionalist view.