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Endogenous distribution, politics and the growth-equity tradeoff

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  • Satya P. Das

    ()
    (Indian Statistical Institute, New Delhi)

  • Chetan Ghate

    ()
    (Indian Statistical Institute, New Delhi)

Abstract

In comparison to the standard literature on inequality and growth which assumes the former to be exogenous, we formulate a model in which inequality and growth are both endogenous. Furthermore, long-run distribution, at least locally, is shown to be independent of the initial distribution of factor ownership. It is shown that exogenous policy changes that are primarily targeted towards growth and foster less inequality do enhance growth. But those that are primarily redistributive and imply more equal distribution reduce growth. This is consistent with recent empirical work which shows that inequality and growth may be positively related.

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Bibliographic Info

Paper provided by Indian Statistical Institute, New Delhi, India in its series Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers with number 03-06.

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Length: 35 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:ind:isipdp:03-06

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Keywords: Median Voter; Endogenous Growth; Wealth Distribution; Distributive Conflict; Redistributive Policy;

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  1. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  2. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
  3. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  4. Kiminori Matsuyama, 1998. "Endogenous Inequality," Discussion Papers 1238, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  6. Oded Galor & Omer Moav, 2000. "Das Human Kapital," Working Papers 2000-17, Brown University, Department of Economics.
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Cited by:
  1. Chetan Ghate, 2006. "Transitional Dynamics in a Growth Model with Distributive Politics," Papers on Entrepreneurship, Growth and Public Policy 2006-22, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  2. Bertocchi, Graziella, 2007. "The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective," CEPR Discussion Papers 6115, C.E.P.R. Discussion Papers.
  3. Areendam Chanda & Debajyoti Chakrabarty & Chetan Ghate, . "Education, Growth, and Redistribution in the Presence of Capital Flight," Departmental Working Papers 2006-10, Department of Economics, Louisiana State University.

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