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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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References

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  1. 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.
  2. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  3. 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.
  4. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  5. Oded Galor & Omer Moav, 2000. "Das Human Kapital," Working Papers 2000-17, Brown University, Department of Economics.
  6. Matsuyama, Kiminori, 2000. "Endogenous Inequality," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 743-59, October.
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Cited by:
  1. Bertocchi, Graziella, 2007. "The Vanishing Bequest Tax: The Comparative Evolution of Bequest Taxation in Historical Perspective," IZA Discussion Papers 2578, Institute for the Study of Labor (IZA).
  2. 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.
  3. Debajyoti Chakrabarty, 2006. "Education, Growth, and Redistribution in the Presence of Capital Flight," Papers on Entrepreneurship, Growth and Public Policy 2006-21, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.

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