The Tradeoff Between Growth and Redistribution: ELIE in an Overlapping Generations Model
The ELIE scheme of Kolm taxes labour capacities instead of labour income in order to circumvent the distortionary effect of taxation on labour supply. Still, Kolm does not study the impact of ELIE on human capital formation and investment. In this paper, we build an overlapping generations (OLG) model with heterogenous agents and endogenous growth driven by investment in human capital. We study the effect of ELIE on education investment and other aggregate economic variables. Calibrating the model to French data, we highlight a tradeoff between growth and redistribution. With a perfect credit market, ELIE is successful in reducing inequalities and poverty, but it is at the expense of lower investment in education and slower growth. In an economy with an imperfect credit market where individuals cannot borrow to educate, the tradeoff between growth and redistribution is not overturned but is less severe. However, it is possible to overturn completely that trade-off simply by changing the base of taxation for the young generation which is equivalent to subsidising education.
|Date of creation:||07 May 2009|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00382513/en/|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
- repec:cup:cbooks:9780521001151 is not listed on IDEAS
- Timothy J Kehoe & David K Levine, 1993.
"Debt Constrained Asset Markets,"
Levine's Working Paper Archive
1276, David K. Levine.
- Michel Lubrano, 2008. "The Redistributive Aspects of ELIE: a simulationapproach," Working Papers halshs-00347278, HAL.
- Jose De Gregorio & Se-Jik Kim, 1994.
"Credit Markets with Differences in Abilities: Education, Distribution, and Growth,"
IMF Working Papers
94/47, International Monetary Fund.
- De Gregorio, Jose & Kim, Se-Jik, 2000. "Credit Markets with Differences in Abilities: Education, Distribution, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 579-607, August.
- José De Gregorio & Se-Jik Kim, 1998. "Credit Markets with Differences in Abilities: Education, Distribution, and Growth," Documentos de Trabajo 42, Centro de Economía Aplicada, Universidad de Chile.
- repec:cup:cbooks:9780521806428 is not listed on IDEAS
- Cardia, Emanuela & Kozhaya, Norma & Ruge-Murcia, Francisco J, 2003. " Distortionary Taxation and Labor Supply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(3), pages 350-73, June.
- David de la CROIX, 2014. "Economic Growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Duffy, John & Papageorgiou, Chris, 2000. " A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
- Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
- Maddison, Angus, 2007. "Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History," OUP Catalogue, Oxford University Press, number 9780199227204, March.
- Cecilia García-Pe�Alosa & Stephen J. Turnovsky, 2007.
"Growth, Income Inequality, and Fiscal Policy: What Are the Relevant Trade-offs?,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 39(2-3), pages 369-394, 03.
- Cecilia Garcia-Penalosa & Stephen Turnovsky, . "Growth, Income Inequality, and Fiscal Policy: What are the Relevant Tradeoffs?," Working Papers UWEC-2006-27-P, University of Washington, Department of Economics.
- repec:cup:cbooks:9780521017039 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00382513. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.