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Growth and inequality in a small open economy

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  • Chen, Yu-chin
  • Turnovsky, Stephen J.

Abstract

This paper employs an endogenous growth model to analyze the growth and inequality relation for a small open economy where agents differ in their initial endowments of capital stock and international bond-holdings. We analyze the impacts of different structural shocks through their effects on agents' relative wealth and their labor supply decisions. Both theoretical analysis and numerical simulations demonstrate that openness - access to an international capital market - enriches the growth-inequality relations from those of the corresponding closed economy. Specifically, we show that the growth and distributional consequences of structural shocks depend crucially on whether the underlying heterogeneity originates with the initial endowment of domestic capital or foreign bonds.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 2 (June)
Pages: 497-514

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:2:p:497-514

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Growth Inequality Small open economy;

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References

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Cited by:
  1. Angus C. Chu & Shin-Kun Peng, 2009. "International Intellectual Property Rights: Effects on Growth, Welfare and Income Inequality," IEAS Working Paper : academic research 09-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  2. G. C. Lim & Paul D. McNelis, 2014. "Income Inequality, Trade and Financial Openness," Melbourne Institute Working Paper Series wp2014n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

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