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Dynamics of Income Distribution

  • Hongyi Li

    (Chinese University of Hong Kong)

  • Danyang Xie

    (Hong Kong University of Science & Technology)

  • Heng-fu Zou

    (Development Research Group, The World Bank)

In this paper, we have obtained closed-form solutions in Cass-Koopmans growth models with heterogeneous agents. The relationship between the form of production function and the dynamics of income distribution is made explicit. We then use this relationship to determine what production structure is simultaneously consistent with facts on growth and income inequality. Our empirical findings give support to models with decreasing returns in the reproducible factor.

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Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 76.

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Length: 31 pages
Date of creation: Jul 1999
Date of revision:
Publication status: Published in Canadian Journal of Economics, Volume 33, Issue 4, pages 937¨C961, November 2000
Handle: RePEc:cuf:wpaper:76
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  1. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-97, July.
  2. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
  3. Jaume Ventura & Francesco Caselli, 2000. "A Representative Consumer Theory of Distribution," American Economic Review, American Economic Association, vol. 90(4), pages 909-926, September.
  4. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  5. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  6. Devarajan, Shantayanan & Danyang, Xie & Zou, Heng-fu, 1998. "Should public capital be subsidized or provided?," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 319-331, April.
  7. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  8. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  9. Xie, Danyang, 1991. "Increasing Returns and Increasing Rates of Growth," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 429-35, April.
  10. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
  11. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  12. Giuseppe Bertola, 1991. "Factor Shares and Savings in Endogenous Growth," NBER Working Papers 3851, National Bureau of Economic Research, Inc.
  13. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
  14. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  16. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  17. Li, Hongyi & Zou, Heng-fu, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," Review of Development Economics, Wiley Blackwell, vol. 2(3), pages 318-34, October.
  18. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Papanek, Gustav F. & Kyn, Oldrich, 1986. "The effect on income distribution of development, the growth rate and economic strategy," Journal of Development Economics, Elsevier, vol. 23(1), pages 55-65, September.
  20. Atkeson, Andrew & Lucas, Robert E, Jr, 1992. "On Efficient Distribution with Private Information," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 427-53, July.
  21. repec:tpr:qjecon:v:110:y:1995:i:2:p:495-525 is not listed on IDEAS
  22. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  23. Lindert, Peter H. & Williamson, Jeffrey G., 1985. "Growth, equality, and history," Explorations in Economic History, Elsevier, vol. 22(4), pages 341-377, October.
  24. Lucas, Robert E, Jr, 1992. "On Efficiency and Distribution," Economic Journal, Royal Economic Society, vol. 102(411), pages 233-47, March.
  25. Adelman, Irma & Robinson, Sherman, 1989. "Income distribution and development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 19, pages 949-1003 Elsevier.
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