Advanced Search
MyIDEAS: Login to save this paper or follow this series

Inverted u-shaped relationship between inequality and economic performance

Contents:

Author Info

  • Yuichiro Matsumoto

    ()
    (Graduate School of Economics, Osaka University)

Registered author(s):

    Abstract

    This paper shows that in a borrowing-constrained economy, a median level of inequality stimulates investment, whereas low and high levels of inequality dampen investment. This nonlinearity is a result of two effects. There are more rich individuals in an equal economy than in an unequal economy. Therefore, more individuals can invest. However, in an equal economy, rich individuals have less wealth than they would in an unequal economy, which can dampen investment. My paper shows that these two effects produce nonlinearity if investment is indivisible.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1419.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 14-19.

    as in new window
    Length: 19 pages
    Date of creation: Apr 2014
    Date of revision:
    Handle: RePEc:osk:wpaper:1419

    Contact details of provider:
    Email:
    Web page: http://www.econ.osaka-u.ac.jp/
    More information through EDIRC

    Related research

    Keywords: Economic development; Indivisible investment; Misallocation of capital;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Abhijit V. Banerjee & Benjamin Moll, 2010. "Why Does Misallocation Persist?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 189-206, January.
    2. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May.
    3. Bengt Holmstrom & Jean Tirole, 1996. "Private and Public Supply of Liquidity," NBER Working Papers 5817, National Bureau of Economic Research, Inc.
    4. Maitreesh Ghatak & Nien-Huei Jiang, 2000. "A Simple Model of Inequality, Occupational Choice, and Development," Vanderbilt University Department of Economics Working Papers 0007, Vanderbilt University Department of Economics.
    5. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2006. "Zombie Lending and Depressed Restructuring in Japan," NBER Working Papers 12129, National Bureau of Economic Research, Inc.
    6. Francisco J. Buera & Benjamin Moll, 2012. "Aggregate Implications of a Credit Crunch," NBER Working Papers 17775, National Bureau of Economic Research, Inc.
    7. Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-34, October.
    8. Virgiliu Midrigan & Daniel Yi Xu, 2010. "Finance and Misallocation: Evidence from Plant-level Data," NBER Working Papers 15647, National Bureau of Economic Research, Inc.
    9. 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.
    10. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:1419. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.