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Growth And Inequality: Model Evaluation Based On An Estimation-Calibration Strategy

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  • Jeong, Hyeok
  • Townsend, Robert M.

Abstract

This paper evaluates two well-known models of growth with inequality that have explicit micro underpinnings related to household choice. With incomplete markets or transactions costs, wealth can constrain investment in business and the choice of occupation and also constrain the timing of entry into the formal financial sector. Using the Thai Socio-Economic Survey, we estimate the distribution of wealth and the key parameters that best fit cross-sectional data on household choices and wealth. We then simulate the model economies for two decades at the estimated initial wealth distribution and analyze whether the model economies at those micro-fit parameter estimates can explain the observed macro and sectoral aspects of income growth and inequality change. Both models capture important features of Thai reality. Anomalies and comparisons across the two distinct models yield specific suggestions for improved research on the micro foundations of growth and inequality.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 12 (2008)
Issue (Month): S2 (September)
Pages: 231-284

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Handle: RePEc:cup:macdyn:v:12:y:2008:i:s2:p:231-284_07

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Cited by:
  1. Oriana Bandiera & Robin Burgess & Narayan Das & Selim Gulesci & Imran Rasul & Munshi Sulaiman, 2013. "Can Basic Entrepreneurship Transform the Economic Lives of the Poor?," STICERD - Economic Organisation and Public Policy Discussion Papers Series 43, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Satchi, Mathan & Temple, Jonathan, 2006. "Growth and Labour Markets in Developing Countries," CEPR Discussion Papers 5515, C.E.P.R. Discussion Papers.
  3. Yongseok Shin & Francisco Buera, 2007. "Financial Frictions and the Persistence of History: A Quantitative Exploration," 2007 Meeting Papers 300, Society for Economic Dynamics.
  4. Kenichi Ueda & Robert M. Townsend, 2007. "Welfare Gains from Financial Liberalization," IMF Working Papers 07/154, International Monetary Fund.
  5. Hyeok Jeong & Robert Townsend, 2007. "Sources of TFP growth: occupational choice and financial deepening," Economic Theory, Springer, vol. 32(1), pages 179-221, July.
  6. Hyeok Jeong, 2005. "Assessment of Relationship between Growth and Inequality: Micro Evidence from Thailand," IEPR Working Papers 05.20, Institute of Economic Policy Research (IEPR).
  7. Demirguc-Kunt, Asli & Levine, Ross, 2009. "Finance and inequality : theory and evidence," Policy Research Working Paper Series 4967, The World Bank.
  8. Robert M. Townsend & Hyeok Jeong, 2004. "Discovering the Sources of TFP Growth: Occupation Choice, Capital Heterogeneity, and Financial Deepening," Econometric Society 2004 North American Summer Meetings 405, Econometric Society.
  9. Ugo Panizza, 2013. "Financial Development and Economic Growth: Known Knowns, Known Unknowns, and Unknown Unknowns," IHEID Working Papers 14-2013, Economics Section, The Graduate Institute of International Studies.
  10. Zhorin, Victor & Stef-Praun, Tiberiu, 2008. "Grid-enabled estimation of structural economic models," MPRA Paper 11384, University Library of Munich, Germany.
  11. Felipe Diniz, 2005. "Contructing A Broader Measure Of Welfare Incorporating The Access To Public Goods," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 045, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  12. Demirgüç-Kunt, A. & Beck, T.H.L. & Honohan, P., 2008. "Finance for all?: Policies and pitfalls in expanding access," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3508393, Tilburg University.

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