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Functional Distribution, Land Ownership and Industrial Takeoff: The Role of Effective Demand

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  • Bilancini Ennio

    ()
    (University of Siena)

  • D'Alessandro Simone

    ()
    (University of Pisa)

Abstract

In this paper we analyse how the distribution of land property rights affects industrial takeoff and aggregate income through its impact on effective demand. We apply a modified version of the model provided in Murphy et al. (1989, QJE) which allows us to analyse the role of land distribution when it is independent of the distribution of firm ownership. We extend the result of Murphy et al. (1989, QJE) by showing that industrialization and income depend non-monotonically on the distribution of land and by demonstrating that this result is due to the way land distribution affects the distribution of profits among firms. Moreover, we show that there may be a tradeoff between industrialization and income, the latter being associated with a distribution of land which is more equal than that associated with maximum industrialization.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 8 (2008)
Issue (Month): 1 (August)
Pages: 1-36

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Handle: RePEc:bpj:bejeap:v:8:y:2008:i:1:n:34

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  1. Kevin M. Murphy & Andrei Shleifer & Robert Vishny, 1988. "Income Distribution, Market Size, and Industrialization," NBER Working Papers 2709, National Bureau of Economic Research, Inc.
  2. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-26, October.
  3. Giorgio Bellettini & Gianmarco I. P. Ottaviano, 2005. "Special Interests and Technological Change," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 43-56.
  4. Baland, Jean-Marie & Ray, Debraj, 1991. "Why does asset inequality affect unemployment? A study of the demand composition problem," Journal of Development Economics, Elsevier, vol. 35(1), pages 69-92, January.
  5. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
  6. Deininger, K & Squire, L, 1996. "Measuring Income Inequality : A New Data-Base," Papers 537, Harvard - Institute for International Development.
  7. Kiminori Matsuyama, 1999. "The Rise of Mass Consumption Societies," Discussion Papers 1289, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Oded Galor & Omer Moav & Dietrich Vollrath, 2004. "Land Inequality and the Origin of Divergence and Overtaking in the Growth Process: Theory and Evidence," Working Papers 2003-04, Brown University, Department of Economics.
  9. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  10. Zweimuller, Josef, 2000. " Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," Journal of Economic Growth, Springer, vol. 5(2), pages 185-206, June.
  11. Mani, Anandi, 2001. " Income Distribution and the Demand Constraint," Journal of Economic Growth, Springer, vol. 6(2), pages 107-33, June.
  12. Jeon, Yoong-Deok & Kim, Young-Yong, 2000. "Land Reform, Income Redistribution, and Agricultural Production in Korea," Economic Development and Cultural Change, University of Chicago Press, vol. 48(2), pages 253-68, January.
  13. Eswaran, Mukesh & Kotwal, Ashok, 1993. "A theory of real wage growth in LDCs," Journal of Development Economics, Elsevier, vol. 42(2), pages 243-269, December.
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Cited by:
  1. Jeorge Àlvarez & Ennio Bilancini & Simone D’Alessandro & Gabriel Porcile, 2010. "Agricultural institutions, industrialization and growth: the case of New Zealand and Uruguay in 1870-1940," Center for Economic Research (RECent) 053, University of Modena and Reggio E., Dept. of Economics.

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