Income inequality has been growing dramatically lately and managed its top for the last 30 years. The consequences of such a grow appeared to be destructive for the advanced economies.
The IMF warns that if the income share increases for the top 20 per cent of households, then economic growth "actually declines" over the medium term.
It says this suggests that "the benefits do not trickle down".
In contrast, it says an increase in the income share of the bottom 20 per cent of households is associated with higher GDP growth.
The IMF report, Causes and Consequences of Income Inequality: A Global Perspective, argues that income inequality and income distribution both matter for economic growth, marking a significant shift in official IMF thinking from decades past.
It warns that widening income inequality has become so bad in advanced economies that policymakers "need to focus on the poor and the middle class" if they want to boost economic growth globally.
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