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Endogenous Distribution, Politics, and the Growth-Equity Tradeoff

Author

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  • Das Satya P

    (Indian Statistical Institute, Delhi)

  • Ghate Chetan

    (Indian Statistical Institute, Delhi)

Abstract

In comparison to the standard literature on inequality and growth which assumes the former to be exogenous, we formulate a model in which inequality and growth are both endogenous. Long-run distribution, at least locally, is shown to be independent of the initial distribution of factor ownership. It is shown that exogenous policy changes that are primarily targeted towards growth and foster less inequality do enhance growth. But policies that are primarily redistributive and imply a more equal distribution reduce growth. This is consistent with recent empirical work which shows that inequality and growth may be positively related.

Suggested Citation

  • Das Satya P & Ghate Chetan, 2004. "Endogenous Distribution, Politics, and the Growth-Equity Tradeoff," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-32, July.
    • Handle: RePEc:bpj:bejmac:v:contributions.4:y:2004:i:1:n:6
    DOI: 10.2202/1534-6005.1199
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    Cited by:

    1. Graziella Bertocchi, 2011. "The Vanishing Bequest Tax: The Comparative Evolution Of Bequest Taxation In Historical Perspective," Economics and Politics, Wiley Blackwell, vol. 23(1), pages 107-131, March.
    2. Chakrabarty Debajyoti & Chanda Areendam & Ghate Chetan, 2006. "Education, Growth, and Redistribution in the Presence of Capital Flight," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(2), pages 1-41, November.
    3. Chetan Ghate, 2005. "Transitional Dynamics in a Growth Model with Distributive Politics," Discussion Papers of DIW Berlin 514, DIW Berlin, German Institute for Economic Research.
    4. Chetan Ghate, 2005. "Endogenous distribution and equilibrium growth: a note," Bulletin of Economic Research, Wiley Blackwell, vol. 57(2), pages 171-183, April.
    5. Gabrieli, Tommaso, 2012. "Inequality, Intergenerational Mobility and Redistributive Policies under Endogenous Information," The Journal of Economic Asymmetries, Elsevier, vol. 9(1), pages 23-49.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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