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Growth and inequality in a small open economy

Listed author(s):
  • Chen, Yu-chin
  • Turnovsky, Stephen J.

This paper employs an endogenous growth model to analyze the growth and inequality relation for a small open economy where agents differ in their initial endowments of capital stock and international bond-holdings. We analyze the impacts of different structural shocks through their effects on agents' relative wealth and their labor supply decisions. Both theoretical analysis and numerical simulations demonstrate that openness - access to an international capital market - enriches the growth-inequality relations from those of the corresponding closed economy. Specifically, we show that the growth and distributional consequences of structural shocks depend crucially on whether the underlying heterogeneity originates with the initial endowment of domestic capital or foreign bonds.

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File URL: http://www.sciencedirect.com/science/article/pii/S0164-0704(09)00090-1
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 2 (June)
Pages: 497-514

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:2:p:497-514
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Aghion, Philippe & Caroli, Eve & García-Peñalosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
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  8. Turnovsky, Stephen J. & Garci­a-Peñalosa, Cecilia, 2008. "Distributional dynamics in a neoclassical growth model: The role of elastic labor supply," Journal of Economic Dynamics and Control, Elsevier, vol. 32(5), pages 1399-1431, May.
  9. Thorvaldur Gylfason & Gylfi Zoega, 2002. "Inequality and Economic Growth: Do Natural Resources Matter?," CESifo Working Paper Series 712, CESifo Group Munich.
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  12. Bertola, Giuseppe, 1991. "Factor Shares and Savings In Endogenous Growth," CEPR Discussion Papers 576, C.E.P.R. Discussion Papers.
  13. Yann Algan & Arnaud Cheron & Jean-Olivier Hairault & Francois Langot, 2003. "Wealth Effect on Labor Market Transitions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 156-178, January.
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  17. Theo S Eicher & Cecilia Garcia Penalosa, "undated". "Inequality and Growth," Working Papers 0083, University of Washington, Department of Economics.
  18. Saint-Paul, G. & Verdier, T., 1991. "Education, Democracy and growth," DELTA Working Papers 91-27, DELTA (Ecole normale supérieure).
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  25. repec:dau:papers:123456789/10091 is not listed on IDEAS
  26. Turnovsky, Stephen J., 2002. "Knife-Edge Conditions And The Macrodynamics Of Small Open Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 6(02), pages 307-335, April.
  27. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
  28. Stephen J. Turnovsky, 1999. "Fiscal Policy and Growth in a Small Open Economy with Elastic Labor Supply," Canadian Journal of Economics, Canadian Economics Association, vol. 32(5), pages 1191-1214, November.
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