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Global Poverty Reduction And Pareto-Improving Redistribution

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  • Chu, Angus C.

Abstract

Can a transfer of wealth from the United States to the least developed countries be Pareto improving? We analyze this question in an open-economy R&D-based growth model, in which the high-income (low-income) country produces innovative (homogeneous) goods. We find that wealth redistribution to the low-income country simultaneously reduces global inequality and increases economic growth through an increase in labor supply in the high-income country. Given that the market equilibrium of R&D-based growth models is usually inefficient due to R&D externalities, the wealth redistribution may lead to a Pareto improvement, which occurs if the discount rate is sufficiently low or R&D productivity is sufficiently high.

Suggested Citation

  • Chu, Angus C., 2012. "Global Poverty Reduction And Pareto-Improving Redistribution," Macroeconomic Dynamics, Cambridge University Press, vol. 16(04), pages 605-624, September.
  • Handle: RePEc:cup:macdyn:v:16:y:2012:i:04:p:605-624_00
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    Cited by:

    1. G. Candela & M. Castellani & R. Dieci, 2015. "The wise use of leisure time. A three-sector endogenous growth model with leisure services," Working Papers wp1010, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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