Ostry, Berg and Tsangarides (2014) (hereafter, OBT) emphasize the distinction between “gross” and “net” inequality (i.e. inequality before and after the redistributive effects of taxes and transfers are taken into account). They regress growth on initial income, a proxy for the net Gini, and a proxy for redistribution based on the difference between the net and the gross Gini. They rely on a data set described in Solt (2009) which extensively imputes the limited available cross‐country data on net and gross income inequality to arrive at a very large and dense cross‐country panel of annual observations on the net and gross Gini.<sup>7</sup> OBT find that higher net inequality is significantly associated with lower subsequent growth, while redistribution is not significantly correlated with growth. They conclude from this that redistributive policies that reduce the net Gini coefficient can increase growth.

Halter, Oechslin and Zweimüller (2014) (hereafter, HOZ) focus on the dynamic relationship between inequality and growth. They develop a theoretical model in which higher inequality is associated with faster growth in the short term, reflecting a more efficient allocation of assets across individuals. However, in the long term, an adverse political economy channel takes over, in which greater inequality leads to underprovision of public goods that subsequently reduces growth. To bring this theory to the data, they estimate a regression of growth on lagged inequality and twice‐lagged inequality, taking their inequality data from the widely‐used UNU‐WIDER World Income Inequality Database. Consistent with their theory, they find that the coefficient on lagged inequality is positive (and sometimes significantly so), while the coefficient on twice lagged inequality is significantly negative. They also find that the sum of these two coefficients is negative, suggesting a negative impact of a permanent increase in inequality on long‐run growth.

Dabla‐Norris, Kochhar, Suphaphihpat, Ricka, and Tsounta (2015) (hereafter, DKSRT) provide a theoretical and empirical review of the causes and consequences of inequality, focusing on cross‐ country data. In the first part of their paper, they report new empirical evidence on the effects of inequality on subsequent growth. They first document a statistically‐significant negative relationship between the net Gini and subsequent growth using an empirical specification and dataset that is very similar to OBT. They then use a smaller sample of countries for which income shares by quintile of the population are available in the UNU‐WIDER World Income Inequality Database, and estimate a series of

> 7 Since my focus in this paper is solely on the role of instrument strength, I do not delve into the various concerns about this dataset ‐‐ for details see Jenkins (2014).  Briefly, the fundamental challenge with this imputed dataset is that actual data on pre‐ and post‐tax inequality is very scarce outside OECD economies, and so for the developing economies that make up the majority of observations in OBT’s data, the Solt (2009) data contains very little unimputed information about the extent to which developing countries redistribute through their tax and transfer systems.

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