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Inequality and institutional quality in a growth model

Author

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  • Takuma Kunieda

    (Kwansei Gakuin University)

  • Masashi Takahashi

    (Kobe University)

Abstract

By applying a growth model of an occupational choice between being a worker and being a criminal, an institutional Kuznets curve is produced. Using the Gini coefficient derived from the model, we investigate how institutional quality affects wealth inequality across agents. In the case of a relatively higher capital share, an institutional Kuznets curve can emerge. In this case, an improvement in institutional quality decreases the possibility of being stolen but increases the amount of wealth stolen. In the early stage of economic development, since the latter effect dominates the former, inequality widens as institutional quality improves. In contrast, since the converse is true in the late stage, inequality shrinks once institutions have sufficiently matured. In the case of a lower capital share, an institutional Kuznets curve cannot emerge. In this case, inequality monotonically shrinks as institutional quality improves. Furthermore, we present government policies that reduce inequality and achieve the first-best outcome.

Suggested Citation

  • Takuma Kunieda & Masashi Takahashi, 2022. "Inequality and institutional quality in a growth model," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 189-213, April.
  • Handle: RePEc:spr:eaiere:v:19:y:2022:i:1:d:10.1007_s40844-020-00195-w
    DOI: 10.1007/s40844-020-00195-w
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    Cited by:

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    2. Shahid Iqbal & Abdul Qayyum Khan & Muhammad Yar Khan & Lamya Al-Aali, 2021. "The Dynamics of Financial Development, Government Quality, and Economic Growth in Different Groups of Economies," Sustainability, MDPI, vol. 13(14), pages 1-14, July.
    3. Hiroaki Sasaki, 2022. "Special feature: economic dynamics—growth, capital, labor, technology, and money," Evolutionary and Institutional Economics Review, Springer, vol. 19(1), pages 159-167, April.

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    More about this item

    Keywords

    Inequality; Institutional quality; Heterogeneous agents; Gini coefficient; Institutional Kuznets curve;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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