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Redistribution and Growth: Pareto Improvements

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  • Chou, Chien-Fu
  • Talmain, Gabriel

Abstract

This paper analyzes the relationship between income distribution and economic growth. It introduces heterogeneous households who have preferences for leisure into Grossman and Helpman's model of endogenous growth (in which income distribution has no effect on economic growth). Wealth distribution affects the endogenous rate of growth as the labor supply of each individual responds inversely to his permanent income. When the labor Engel curve is concave (convex), unequal wealth distribution decreases (increases) the rate of growth. Pareto-improving-growth-enhancing wealth redistributions are characterized. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Chou, Chien-Fu & Talmain, Gabriel, 1996. "Redistribution and Growth: Pareto Improvements," Journal of Economic Growth, Springer, vol. 1(4), pages 505-523, December.
    • Handle: RePEc:kap:jecgro:v:1:y:1996:i:4:p:505-23
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    References listed on IDEAS

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