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Lucas vs. Lucas

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Author Info

  • Juan Carlos Cordoba
  • Geneviève Verdier

Abstract

Lucas (2004) asserts that "Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution... The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production." In this paper we evaluate this claim using an extended version of Lucas'' (1987) welfare-evaluation framework. Surprisingly, we find that the welfare costs of inequality outweigh the benefits of growth in most cases. These calculations support the case for a research agenda that treats not only growth but also inequality as a priority.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/17.

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Length: 39
Date of creation: 01 Jan 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/17

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Keywords: Economic growth; Poverty; social welfare; country inequality; welfare function; welfare measures; welfare costs; cross-country inequality; welfare gains; social welfare function; per capita consumption; consumption inequality; total inequality; welfare consequences; reducing inequality; welfare analysis; consumption growth; welfare measure; welfare impact; levels of inequality; redistributive policies; aggregate welfare; log-normal distribution; welfare comparisons; welfare level; social mobility; welfare functions; welfare benefits; redistributive taxation; per capita consumption growth; welfare economics; unequal opportunities; social welfare functions; inequality levels; welfare implications; unemployment insurance; world income inequality; average welfare; distributive politics; changes in inequality; unemployment; measures of inequality; inequality reduction; social benefits;

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References

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Citations

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Cited by:
  1. Cordoba, Juan Carlos & Verdier, Genevieve, 2010. "Inequality and Growth: Some Welfare Calculations," Staff General Research Papers 32119, Iowa State University, Department of Economics.
  2. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2007. "Insurance and Opportunities: A Welfare Analysis of Labor Market Risk," NBER Working Papers 13673, National Bureau of Economic Research, Inc.

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