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Endogenous Distribution, Politics, and the Growth-Equity Tradeoff

  • Das Satya P

    ()

    (Indian Statistical Institute, Delhi)

  • Ghate Chetan

    ()

    (Indian Statistical Institute, Delhi)

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.

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Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 4 (2004)
Issue (Month): 1 (July)
Pages: 1-32

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Handle: RePEc:bpj:bejmac:v:contributions.4:y:2004:i:1:n:6
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  1. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  2. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
  3. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
  4. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  5. Oded Galor & Omer Moav, 2000. "Das Human Kapital," Working Papers 2000-17, Brown University, Department of Economics.
  6. Kiminori Matsuyama, 1998. "Endogenous Inequality," Discussion Papers 1238, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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