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Age distribution and age heterogeneities in economic profiles as sources of conflict between efficiency and equity in the Solow-Stiglitz framework

  • Piero Manfredi
  • Luciano Fanti

Much of the debate on the role played by the age distribution of the population in shaping the growth regimes of the neoclassical growth model of Solow has focused on the notion of capital dilution and the possibility that "optimal" population growth regimes (OPGR) exist. Conversely less has been done as regards the implications of growth regimes for distribution, probably because Stiglitz's (1969) fundamental result predicts that economic growth sets in motion forces of an "essentially" egalitarian nature. In this paper we start to investigate how distinct regimes of population growth and age distribution affect income and wealth distribution in a Solow-Stiglitz framework embedding a single but fundamental "inequality preserving" force, e.g. an heterogeneous age profile of labour productivity. Our main results are that 1) a population growth regime characterised by minimal inequality (a MinIPGR) often exists, but 2) it is usually amazingly far from the corresponding OPGR, when also an OPGR exists. This seems to suggest a potentially striking trade-off between efficiency and equity during economic growth.

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Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2004/37.

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Date of creation: 01 Jan 2004
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Handle: RePEc:pie:dsedps:2004/37
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  1. Ronald Lee, 1980. "Age Structure, Intergenerational Transfers and Economic Growth : an Overview," Revue Économique, Programme National Persée, vol. 31(6), pages 1129-1156.
  2. Miles, David K, 1997. "Modelling the Impact of Demographic Change Upon the Economy," CEPR Discussion Papers 1762, C.E.P.R. Discussion Papers.
  3. Arthur, W Brian & McNicoll, Geoffrey, 1978. "Samuelson, Population and Intergenerational Transfers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(1), pages 241-46, February.
  4. Judith K. Hellerstein & David Neumark, 1995. "Are Earnings Profiles Steeper Than Productivity Profiles? Evidence from Israeli Firm-Level Data," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 89-112.
  5. Arthur, W Brian & McNicoll, Geoffrey, 1977. "Optimal Time Paths with Age-Dependence: A Theory of Population Policy," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 111-23, February.
  6. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467.
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