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

Does a Rising Tide Lift All Boats? Welfare Consequences of Asymmetric Growth

Contents:

Author Info

  • Murphy, Daniel P

Abstract

A common presumption is that increased growth in the aggregate enhances the welfare of both the rich and the poor. I show that instead, as the rich get richer, the welfare of the poor may decline if the underlying growth is asymmetric. There are two distinct and complementary explanations: First, sector-biased, skill-biased technological change, and second, efficiency improvements in the government sector. In the first case, skill-biased technological change in sectors consumed by the skilled rich increases their income beyond the increase in economic wealth, causing a decline in the consumption and welfare of the low-skilled poor. This result stands in contrast to the standard model of skill-biased technological change. In the second case, growth takes the form of improved efficiency in a government sector that is financed by rich taxpayers. The welfare of the low-skilled poor will decline whenever the consumption bundle of the skilled rich embodies more skill intensity than does the production of government services. This analysis demonstrates that a rising tide need not lift all boats and that the exact nature of consumption patterns is important not only for growth and inequality, as has been emphasized in earlier literature, but also for welfare.

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://mpra.ub.uni-muenchen.de/29407/
File Function: original version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 29407.

as in new window
Length:
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:pra:mprapa:29407

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: economic growth; inequality; skill-biased technological change; public economics;

Other versions of this item:

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. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, Econometric Society, vol. 68(5), pages 1029-1054, September.
  2. Angrist, Joshua D, 1995. "The Economic Returns to Schooling in the West Bank and Gaza Strip," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1065-87, December.
  3. Oded Galor & Omer Moav, 1998. "Ability Biased Technological Transition, Wage Inequality, and Economic Growth," Working Papers 98-14, Brown University, Department of Economics.
  4. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4763, C.E.P.R. Discussion Papers.
  5. Krugman, Paul, 1987. "The narrow moving band, the Dutch disease, and the competitive consequences of Mrs. Thatcher : Notes on trade in the presence of dynamic scale economies," Journal of Development Economics, Elsevier, Elsevier, vol. 27(1-2), pages 41-55, October.
  6. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(3), pages 537-64, August.
  7. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
  8. Schuetz, Jenny & Kolko, Jed & Meltzer, Rachel, 2012. "Are poor neighborhoods “retail deserts”?," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 42(1-2), pages 269-285.
  9. Kiminori Matsuyama, 1999. "The Rise of Mass Consumption Societies," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1289, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Paul Beaudry & David A. Green, 2003. "Wages and Employment in the United States and Germany: What Explains the Differences?," American Economic Review, American Economic Association, American Economic Association, vol. 93(3), pages 573-602, June.
  11. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, Elsevier, Elsevier.
  12. Francisco J. Buera & Joseph P. Kaboski, 2006. "The Rise of the Service Economy," 2006 Meeting Papers, Society for Economic Dynamics 496, Society for Economic Dynamics.
  13. Josef Zweimueller, . "Schumpeterian Entrepreneurs Meet Engel's Law: The Impact of Inequality on Innovation-Driven Growth," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 009, Institute for Empirical Research in Economics - University of Zurich.
  14. Naito, Hisahiro, 1999. "Re-examination of uniform commodity taxes under a non-linear income tax system and its implication for production efficiency," Journal of Public Economics, Elsevier, Elsevier, vol. 71(2), pages 165-188, February.
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:pra:mprapa:29407. 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: (Ekkehart Schlicht).

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.