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Enterprise, Inequality and Economic Development

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  • Huw Lloyd-Ellis
  • Dan Bernhardt

Abstract

We characterize an equilibrium development process driven by the interaction of the distribution of wealth with credit constraints and the distribution of entrepreneurial skills. When efficient entrepreneurs are relatively abundant, a "traditional" development process emerges in which the evolution of macroeconomic variables accord with empirical regularities and income inequality traces out a Kuznets curve. If, instead, efficient entrepreneurs are relatively scarce, the model generates long-run "distributional cycles" driven by the endogenous interaction between credit constraints, entrepreneurial efficiency and equilibrium wages.

Suggested Citation

  • Huw Lloyd-Ellis & Dan Bernhardt, 2000. "Enterprise, Inequality and Economic Development," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 147-168.
  • Handle: RePEc:oup:restud:v:67:y:2000:i:1:p:147-168.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00125
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    References listed on IDEAS

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    1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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