Growth and Inequality: Model Evaluation Based on an Estimation-Calibration Strategy
AbstractThis paper evaluates two well-known models of growth with inequality that have explicit micro underpinnings related to household choice. With incomplete markets or transactions costs, wealth can constrain investment in business and the choice of occupation and also constrain the timing of entry into the formal financial sector. Using the Thai Socio-Economic Survey, we estimate the distribution of wealth and the key parameters that best fit cross-sectional data on household choices and wealth. We then simulate the model economies for two decades at the estimated initial wealth distribution and analyze whether the model economies at those micro-fit parameter estimates can explain the observed macro and sectoral aspects of income growth and inequality change. Both models capture important features of Thai reality. Anomalies and comparisons across the two distinct models yield specific suggestions for improved research on the micro foundations of growth and inequality.
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Bibliographic InfoPaper provided by Institute of Economic Policy Research (IEPR) in its series IEPR Working Papers with number 05.10.
Length: 63 pages
Date of creation: Sep 2003
Date of revision:
Model Evaluation; Growth and Inequality; Wealth-Constrained Self-Selection;
Other versions of this item:
- Jeong, Hyeok & Townsend, Robert M., 2008. "Growth And Inequality: Model Evaluation Based On An Estimation-Calibration Strategy," Macroeconomic Dynamics, Cambridge University Press, vol. 12(S2), pages 231-284, September.
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-03 (All new papers)
- NEP-CMP-2005-04-10 (Computational Economics)
- NEP-DEV-2005-04-03 (Development)
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