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Growth and distribution in an AK-model with endogenous impatience

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Author Info
BORISSOV, Kirill
LAMBRECHT, StŽphane (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

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Abstract

This paper combines two strands of the literature on inequality and distribution issues: the classical approach, which insists on the division of society into classes characterized by different saving propensities, and the social conflict approach, which considers that inequality inflicts direct and indirect costs to economic development. An endogenous-growth model is studied. We assume that each consumer's subjective discount factor is determined endogenously and depends on economic inequality through the following two channels. On the one hand, it is positively related to the individual consumer's relative wealth. On the other hand, it is negatively affected by a simple aggregate measure of social conflict. We show that, unlike models with exogenously given discount rates, steady state equilibria in our model is indeterminate and that the set of all equilibria is acontinuum which can be parameterized by a simple index of income inequality. The growth rate is ambiguously related to the inequality index. However, under some reasonable assumptions, the growth rate dependence on this index has an inverted U-shaped form.

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Publisher Info
Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007044.

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Date of creation: 01 Jul 2007
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Handle: RePEc:cor:louvco:2007044

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Related research
Keywords: wealth distribution; intertemporal choice; growth; development;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General

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  18. Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutstrom & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," Artefactual Field Experiments 0053, The Field Experiments Website. [Downloadable!]
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