Mitigating the trade-off between equality and dynamic efficiency
AbstractIn a model where decisions on income distribution and investment are separated beltween two classes (workers and capitalists), Lancaster (1973) showed that dynamic inefficiency will occur. The reason is that investors do not internalise the external effects of investment. In two kinds of growth models, this paper proposes income distribution rules that reduce or eliminate these problems, by separating the considerations on efficiency and income distribution from each other.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 6 (1993)
Issue (Month): 2 (Autumn)
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
- Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 559-79, December.
- Lancaster, Kelvin, 1973. "The Dynamic Inefficiency of Capitalism," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1092-1109, Sept.-Oct.
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