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Endogenous distribution, politics and the growth-equity tradeoff

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Author Info
Satya P. Das () (Indian Statistical Institute, New Delhi)
Chetan Ghate () (Indian Statistical Institute, New Delhi)

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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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Publisher 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
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Handle: RePEc:ind:isipdp:03-06

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

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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  1. 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. [Downloadable!] (restricted)
  2. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March. [Downloadable!] (restricted)
  3. Ranjan, Priya, 2001. "Credit constraints and the phenomenon of child labor," Journal of Development Economics, Elsevier, vol. 64(1), pages 81-102, February. [Downloadable!] (restricted)
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  4. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December. [Downloadable!] (restricted)
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  5. Matsuyama, Kiminori, 2000. "Endogenous Inequality," Review of Economic Studies, Blackwell Publishing, vol. 67(4), pages 743-59, October.
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  6. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 35-52, January. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. Philippe Aghion & Eve Caroli & Cecilia Garcia-Penalosa, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December. [Downloadable!] (restricted)
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  9. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
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  10. Banerjee, Abhijit V & Duflo, Esther, 2003. " Inequality and Growth: What Can the Data Say?," Journal of Economic Growth, Springer, vol. 8(3), pages 267-99, September. [Downloadable!] (restricted)
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  11. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July. [Downloadable!] (restricted)
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  12. Das, Satya P, 2000. "Trade among Similar Countries and the Personal Distribution of Income and Wealth," Economica, London School of Economics and Political Science, vol. 67(266), pages 265-81, May. [Downloadable!] (restricted)
  13. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  14. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June. [Downloadable!] (restricted)
  15. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Chetan Ghate, 2006. "Transitional Dynamics in a Growth Model with Distributive Politics," Discussion Papers on Entrepreneurship, Growth and Public Policy 2006-22, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
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  2. Debajyoti Chakrabarty, 2006. "Education, Growth, and Redistribution in the Presence of Capital Flight," Discussion Papers on Entrepreneurship, Growth and Public Policy 2006-21, Max Planck Institute of Economics, Group for Entrepreneurship, Growth and Public Policy. [Downloadable!]
  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. [Downloadable!]
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  4. 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. [Downloadable!] (restricted)
    Other versions:
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