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Wealth inequality, entrepreneurship and industrialization

  • Sahana Roy Chowdhury

    ()

The paper shows that in a two-good economy with a basic and a luxury good sector inequality is indeed a hindrance to provide sufficient incentive for entrepreneurship to low-wealth economic agents. In contrast to the literature it uses both demand and supply-side explanations for the analysis. An entrepreneurial subsidy policy to encourage entrepreneurship in autarky financed by a lump sum tax on the rich is not very effective in unequal economies since it hardly impacts the welfare. When trade is opened up in the luxury good sector of such an economy the sector might cease to exist. In such a scenario, the rich people being the sole consumers would reap the entire benefits of globalization via low price of the imported luxury good. The paper highlights that the crucial question is: ‘how to globalize’ rather than ‘whether to globalize’ and suggests policy measures to make globalization inclusive. Copyright Springer-Verlag 2013

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File URL: http://hdl.handle.net/10.1007/s00712-012-0268-6
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Article provided by Springer in its journal Journal of Economics.

Volume (Year): 108 (2013)
Issue (Month): 1 (January)
Pages: 81-102

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Handle: RePEc:kap:jeczfn:v:108:y:2013:i:1:p:81-102
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=108909

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  1. Grossman, Gene M, 1984. "International Trade, Foreign Investment, and the Formation of the Entrepreneurial Class," American Economic Review, American Economic Association, vol. 74(4), pages 605-14, September.
  2. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
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  5. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
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  7. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Income Distribution, Market Size, and Industrialization," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 537-64, August.
  8. Christiane Clemens & Maik Heinemann, 2005. "On the Effects of Redistribution on Growth and Entrepreneurial Risk-Taking," Working Paper Series in Economics 6, University of Lüneburg, Institute of Economics.
  9. Soon Ryoo, 2011. "Banks with market power, sectoral structure and the big push," Journal of Economics, Springer, vol. 103(1), pages 1-38, May.
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