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Equity and economic growth, a theoretical and empirical study: MENA zone

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  • Dastjerdi, Rasul Bakhshi
  • Isfahani, Rahim Dalali

Abstract

In macroeconomic literature, it is widely held that persuasion of economic growth and more equitable distribution of income (wealth) is not possible at the same time. The basic reason put forward is that to aim for more equitable distribution will reduce total savings in short and medium terms by reducing the weighted average of propensities to save of the different strata of the society. Therefore, the main objective for countries in transitional period is to have a higher economic growth rather than a fairer distribution of income. Recent developments on economic growth studies from a longer perspective and with sustainability criterion has put above idea in real jeopardy. It is shown that by paying more attention to justifiable distribution especially among different generations will promote a higher genuine savings which results in a higher rate of steady economic growth. In this research we use dynamic optimization approach (optimal control) for studying the mechanics of this regularity and test the proposition for selected MENA zone countries and then compare with some developed countries. Our ultimate goal is suggesting a fair fiscal policy to have a high economic growth compatible with a fairer distribution of wealth and income. It seems that any attempt to provide a more equitable condition, will be eventually reached to a higher capital formation, higher saving and higher output per capita in MENA region compared with selected developed countries.

Suggested Citation

  • Dastjerdi, Rasul Bakhshi & Isfahani, Rahim Dalali, 2011. "Equity and economic growth, a theoretical and empirical study: MENA zone," Economic Modelling, Elsevier, vol. 28(1-2), pages 694-700, January.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:1-2:p:694-700
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    References listed on IDEAS

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    1. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    2. Peter Ireland, 2003. "Implementing the Friedman Rule," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 120-134, January.
    3. Thorvaldur Gylfason & Gylfi Zoega, 2003. "Education, Social Equality and Economic Growth: A View of the Landscape," CESifo Economic Studies, CESifo, vol. 49(4), pages 557-579.
    4. Harold L. Cole & Narayana R. Kocherlakota, 1998. "Zero nominal interest rates: why they're good and how to get them," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-10.
    5. Perotti, Roberto, 1996. "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-187, June.
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    Cited by:

    1. Saari, M. Yusof & Dietzenbacher, Erik & Los, Bart, 2014. "Production interdependencies and poverty reduction across ethnic groups in Malaysia," Economic Modelling, Elsevier, vol. 42(C), pages 146-158.

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