Inequality, Growth, and Overtaking
AbstractThis research develops a theory about the role of inequality in the overtaking of growth performance across countries. The theory captures two opposing effects of inequality on factor accumulation and suggests that the qualitative change in their combined effect is a prime cause of overtaking. Due to the initial dominance of the positive effect of inequality, a less egalitarian economy undergoes a higher growth path in the short run, followed by a lower growth path in the long run. It is also shown that divergence or convergence may arise instead of overtaking, depending on the initial levels of development and inequality.
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Date of creation: 15 Apr 2003
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Wealth Distribution; Overtaking; Divergence; Convergence;
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-21 (All new papers)
- NEP-DEV-2003-04-21 (Development)
- NEP-LTV-2003-04-21 (Unemployment, Inequality & Poverty)
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