Profit Sharing, Income Inequality and Capital Accumulation
AbstractThe relationship between economic development and income inequality is not neutral vis-à-vis the role of the financial system in responding to the needs of different categories of agents. Indeed, as shown by the literature of the persistent inequality (e.g. Banarjee and Newman, 1993; Piketty, 1997), taking in account the asymmetric impact of the financial imperfections on wealthy and poor agents changes the pace of the Kuznets (1955) relationship between economic development and income inequality. In this paper we try to analyze the effect of introducing profit-sharing financial contract between banks and entrepreneurs on the evolution of the capital accumulation/income inequality relationship. It is interestingly shown that income inequality disappears when the economy reaches a second stage of development.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 49830.
Date of creation: Apr 2012
Date of revision:
Financial imperfection; profit sharing; inequality; capital accumulation;
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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