A Model of Trickle Down Through Learning
This paper presents an analysis of income distribution based on an overlapping generations model of imperfect capital markets, technological non-convexities and information acquisition. Heterogeneous, altruistic agents apply for loans from financial intermediaries to undertake risky investment projects. Borrowing is prohibited below a critical level of wealth that depends on agents' evaluation of risk which is updated over time according to the arrival of new information. This process of learning governs the transition of lineage wealth and, with it, the dynamics of income distribution. In general, limiting outcomes depend on initial conditions that determine the extent to which class divisions persist in multiple steady state equilibria. Such divisions may vanish if the the initial distribution satisfies certain criteria.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (0)161 275 4868
Fax: (0)161 275 4812
Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/our-research/centre-for-growth-and-business-cycle-research/
More information through EDIRC
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.:
- Alberto Alesina & Dani Rodrik, 1991.
"Distributive Politics and Economic Growth,"
NBER Working Papers
3668, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Zilibotti, Fabrizio, 1997.
"Was Prometheus Unbound by Chance? Risk, Diversification, and Growth,"
Journal of Political Economy,
University of Chicago Press, vol. 105(4), pages 709-51, August.
- Acemoglu, Daron & Zilibotti, Fabrizio, 1996. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth," CEPR Discussion Papers 1426, C.E.P.R. Discussion Papers.
- Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
- Galor, Oded & Zeira, Joseph, 1993.
"Income Distribution and Macroeconomics,"
Review of Economic Studies,
Wiley Blackwell, vol. 60(1), pages 35-52, January.
- Piketty, Thomas, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 173-89, April.
- Benabou, R., 1992.
"Heterogeneity, Stratification, and Growth,"
93-4, Massachusetts Institute of Technology (MIT), Department of Economics.
- Steven N. Durlauf, 1995.
"Neighborhood Feedbacks, Endogenous Stratification, and Income Inequality,"
95-07-061, Santa Fe Institute.
- Fernandez, R. & Rogerson, R., 1992.
"Income Distribution, Communities and the Quality of Public Education: A Policy Analysis,"
1, Boston University - Department of Economics.
- Raquel Fernandez & Richard Rogerson, 1992. "Income Distribution, Communities and the Quality of Public Education: A Policy Analysis," NBER Working Papers 4158, National Bureau of Economic Research, Inc.
- Jovanovic, B. & Nyarko, Y., 1996.
"Learning by Doing and the Choice of Technology,"
96-25, C.V. Starr Center for Applied Economics, New York University.
- Atkinson, A B, 1997.
"Bringing Income Distribution in from the Cold,"
Royal Economic Society, vol. 107(441), pages 297-321, March.
- Robert Wilson, 1975. "Informational Economies of Scale," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 184-195, Spring.
- Lang, William W. & Nakamura, Leonard I., 1990. "The dynamics of credit markets in a model with learning," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 305-318, October.
- 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 274-98, April.
- Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Perotti, Roberto, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 755-76, October.
- Persson, Torsten & Tabellini, Guido, 1994.
"Is Inequality Harmful for Growth?,"
American Economic Review,
American Economic Association, vol. 84(3), pages 600-621, June.
- Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
- Aghion, Philippe & Bolton, Patrick, 1997. "A Theory of Trickle-Down Growth and Development," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 151-72, April.
When requesting a correction, please mention this item's handle: RePEc:man:cgbcrp:06. 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: (Marianne Sensier)
If references are entirely missing, you can add them using this form.