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Growth and distribution in an AK-model with endogenous impatience

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  • BORISSOV, Kirill
  • LAMBRECHT, Stéphane

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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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2134.

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Handle: RePEc:cor:louvrp:-2134

Note: In : Economic Theory, 39, 93-112, 2009
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Citations

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Cited by:
  1. BORISSOV, Kirill & LAMBRECHT, Stéphane, 2007. "Growth and distribution in an AK-model with endogenous impatience," CORE Discussion Papers 2007044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Strulik, Holger, 2009. "Patience and Prosperity," Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Leibniz Universität Hannover dp-426, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  3. Cecilia García-Peñalosa & Stephen J. Turnovsky, 2012. "Income Inequality, Mobility, and the Accumulation of Capital: The Role of Heterogeneous Labor Productivity," Working Papers halshs-00793209, HAL.
  4. Kirill Borissov, 2013. "The existence of equilibrium paths in an AK-model with endogenous time preferences and borrowing constraints," EUSP Deparment of Economics Working Paper Series Ec-01/13, European University at St. Petersburg, Department of Economics.
  5. Kirill Borissov, 2011. "Growth and Distribution in a Model with Endogenous Time Peferences and Borrowing Constraints," DEGIT Conference Papers c016_073, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Pierre Pestieau & Emmanuel Thibault, 2012. "Love thy children or money," Economic Theory, Springer, vol. 50(1), pages 31-57, May.
  7. Marcel Aloy & Gilles De Truchis, 2012. "Estimation and Testing for Fractional Cointegration," Working Papers halshs-00793206, HAL.
  8. Borissov, Kirill & Surkov, Alexander, 2010. "Common and private property to exhaustible resources: theoretical implications for economic growth," MPRA Paper 27524, University Library of Munich, Germany.
  9. Nathalie Chusseau & Joel Hellier, 2012. "Education, Intergenerational Mobility and Inequality," Working Papers 261, ECINEQ, Society for the Study of Economic Inequality.
  10. Borissov, Kirill, 2013. "Growth and distribution in a model with endogenous time preferences and borrowing constraints," Mathematical Social Sciences, Elsevier, vol. 66(2), pages 117-128.

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