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Inequality, Crime and Economic Growth: A Classical Argument for Distributional Equality

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  • Josten, Stefan Dietrich
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    Abstract

    This paper studies the dynamic general-equilibrium interactions between inequality, crime and economic growth by embedding the rational choice-theoretical approach to criminal behavior in a heterogeneous-agents endogenous-growth OLG model. Based on their respective opportunity costs, individuals choose to specialize in either legal or criminal activities. While legal households contribute to aggregate goods supply over time by either working or building human capital, criminals make a living by expropriating legal citizens of part of the latter's income. An increase in inequality lowers the economy's growth rate and possesses negative welfare effects for all agents with endowments equal to or above average and for agents with endowment below average that are born sufficiently far in the future. Copyright 2003 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal International Tax and Public Finance.

    Volume (Year): 10 (2003)
    Issue (Month): 4 (August)
    Pages: 435-52

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    Handle: RePEc:kap:itaxpf:v:10:y:2003:i:4:p:435-52

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    Web page: http://www.springerlink.com/link.asp?id=102915

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    1. Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP.
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    3. Smith, Eric & Wright, Randall, 1992. "Why Is Automobile Insurance in Philadelphia So Damn Expensive?," American Economic Review, American Economic Association, vol. 82(4), pages 756-72, September.
    4. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Laband, David N & Sophocleus, John P, 1992. "An Estimate of Resource Expenditures on Transfer Activity in the United States," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 959-83, August.
    6. Grossman, Herschel I., 1995. "Robin hood and the redistribution of property income," European Journal of Political Economy, Elsevier, vol. 11(3), pages 399-410, September.
    7. Richard B. Freeman, 1996. "Why Do So Many Young American Men Commit Crimes and What Might We Do About It?," NBER Working Papers 5451, National Bureau of Economic Research, Inc.
    8. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
    9. Herschel I. Grossman & Minseong Kim, 1996. "Inequality, Predation and Welfare," NBER Working Papers 5704, National Bureau of Economic Research, Inc.
    10. Perotti, Roberto, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 755-76, October.
    11. Isaac Ehrlich, 1996. "Crime, Punishment, and the Market for Offenses," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 43-67, Winter.
    12. Mathur, Vijay K, 1978. "Economics of Crime: An Investigation of the Deterrent Hypothesis for Urban Areas," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 459-66, August.
    13. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    14. Perotti, Roberto, 1992. "Income Distribution, Politics, and Growth," American Economic Review, American Economic Association, vol. 82(2), pages 311-16, May.
    15. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-27, August.
    16. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
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    Cited by:
    1. Kyriakos C. Neanidis & Vea Papadopoulou, 2012. "Crime, Fertility, and Economic Growth: Theory and Evidence," Centre for Growth and Business Cycle Research Discussion Paper Series 163, Economics, The Univeristy of Manchester.
    2. Michal Brzezinski, 2013. "Income polarization and economic growth," Working Papers 296, ECINEQ, Society for the Study of Economic Inequality.
    3. Jorge Alberto Charles Coll, 2014. "Inequality and growth in the context of the Mexican economy: Does inequality matter for growth?," Working Papers 331, ECINEQ, Society for the Study of Economic Inequality.
    4. Charles-Coll, Jorge A., 2010. "The optimal rate of inequality: A framework for the relationship between income inequality and economic growth," MPRA Paper 28921, University Library of Munich, Germany.

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