This paper estimates models of social spending, income risk, and per capita income levels using data from a post-war panel of OECD countries. The objective is to test two theories about the pathway from inequality to per capita income. According to one theory, inequality reduces incomes because...

Per capita gross domestic product (GDP) is a poor indicator of economic well-being. It measures effective consumption poorly (ignoring the value of leisure and of longer life spans) and it also ignores the value of accumulation for the benefit of future generations. Since incomes are uncertain...