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Growth and distribution in an AK-model with endogenous impatience

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  • BORISSOV, Kirill
  • LAMBRECHT, Stéphane

Abstract

This paper combines two strands of the literature on inequality and distribution issues: the classical approach, which insists on the division of society into classes characterized by different saving propensities, and the social conflict approach, which considers that inequality inflicts direct and indirect costs to economic development. An endogenous-growth model is studied. We assume that each consumer's subjective discount factor is determined endogenously and depends on economic inequality through the following two channels. On the one hand, it is positively related to the individual consumer's relative wealth. On the other hand, it is negatively affected by a simple aggregate measure of social conflict. We show that, unlike models with exogenously given discount rates, steady state equilibria in our model is indeterminate and that the set of all equilibria is acontinuum which can be parameterized by a simple index of income inequality. The growth rate is ambiguously related to the inequality index. However, under some reasonable assumptions, the growth rate dependence on this index has an inverted U-shaped form.
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Suggested Citation

  • BORISSOV, Kirill & LAMBRECHT, Stéphane, 2009. "Growth and distribution in an AK-model with endogenous impatience," LIDAM Reprints CORE 2134, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2134
    DOI: 10.1007/s00199-007-0307-7
    Note: In : Economic Theory, 39, 93-112, 2009
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    1. Zur Theorie der Vermögensverteilung
      by Ekkehart Schlicht in Funktionale Staatsfinanzen on 2014-06-20 14:32:00

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    11. Borissov, Kirill, 2013. "Growth and distribution in a model with endogenous time preferences and borrowing constraints," Mathematical Social Sciences, Elsevier, vol. 66(2), pages 117-128.
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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