Does Growth Affect the Nature of Inequality? Ireland 1994–2001

Much has been written about the relationship between economic growth and aggregate inequality in recent years. In this paper we extend this literature by examining whether economic growth affects, not the level, but rather the nature of inequality. To do this we focus on the Irish economy which experienced a remarkable boom starting in 1994. We analyse the covariance structure of earnings in Ireland to examine whether this rapid growth affected earnings dynamics over the period. Using panel data for the years 1994–2001, we show that, while permanent inequality in Ireland is high, the degree of persistence of inequality was not significantly affected by the rapid growth in the economy.