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The Dynamic Cost And Persistence Of Asset Inequality In An Agrarian Economy

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  • Carter, Michael R.
  • Zimmerman, Frederic

Abstract

A growing literature suggests that inequality is economically costly. However, much of this literature depends on static analyses, begging the question of why a market system doesn't redress inequality over time if it is efficient to do so. We develop a dynamic model of asset accumulation and endogenous asset-price formation in an agrarian economy with multiple market imperfections. The model is parameterized to pre-revolutionary Nicaragua and solved numerically. The results suggest that although a free land market would eventually lead to an egalitarian land distribution, the process would take long enough, and involve sufficiently great factor-use inefficiencies along the way, that a redistributive policy would improve on the market's performance in both equity and efficiency criteria.

Suggested Citation

  • Carter, Michael R. & Zimmerman, Frederic, 1998. "The Dynamic Cost And Persistence Of Asset Inequality In An Agrarian Economy," Staff Papers 12644, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    • Handle: RePEc:ags:wisagr:12644
    DOI: 10.22004/ag.econ.12644
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    Cited by:

    1. Baland, Jean-Marie & Gaspart, Frederic & Platteau, Jean-Philippe & Place, Frank, 2007. "The Distributive Impact of Land Markets in Uganda," Economic Development and Cultural Change, University of Chicago Press, vol. 55(2), pages 283-311, January.
    2. Carter, Michael R. & May, Julian, 1999. "Poverty, livelihood and class in rural South Africa," World Development, Elsevier, vol. 27(1), pages 1-20, January.
    3. Baland, Jean-Marie & Gaspart, Frederic & Platteau, Jean-Philippe & Place, Frank, 2007. "The Distributive Impact of Land Markets in Uganda," Economic Development and Cultural Change, University of Chicago Press, vol. 55(2), pages 283-311, January.

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