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Sustainable Heterogeneity in Exogenous Growth Models: The Socially Optimal Distribution by Government’s Intervention

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  • Harashima, Taiji

Abstract

This paper examines the socially optimal allocation by focusing not on the social welfare function but instead on the utility possibility frontier in exogenous growth models with a heterogeneous population. A unique balanced growth path was found on which all of the optimality conditions of all heterogeneous households are equally and indefinitely satisfied (sustainable heterogeneity). With appropriate government interventions, such a path is always achievable and is uniquely socially optimal for almost all generally usable (i.e., preferences are complete, transitive, and continuous) social welfare functions. The only exceptions are some variants in Nietzsche type social welfare functions, but those types of welfare functions will rarely be adopted in democratic societies. This result indicates that it is no longer necessary to specify the shape of the social welfare function to determine the socially optimal growth path in a heterogeneous population.

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  • Harashima, Taiji, 2013. "Sustainable Heterogeneity in Exogenous Growth Models: The Socially Optimal Distribution by Government’s Intervention," MPRA Paper 51653, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:51653
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    Cited by:

    1. Harashima, Taiji, 2020. "An Alternative Rationale for the Necessity of an Inheritance Tax," MPRA Paper 100015, University Library of Munich, Germany.
    2. Harashima, Taiji, 2020. "A Theory of the Credit-to-GDP Gap: Using Credit Gaps to Predict Financial Crises," MPRA Paper 111732, University Library of Munich, Germany.
    3. Harashima, Taiji, 2020. "Economic Inequality Exacerbated by Economic Rents from Exploitative Contracting," MPRA Paper 104178, University Library of Munich, Germany.
    4. Harashima, Taiji, 2021. "Mechanisms that Make Economic Inequality Increase in Democratic Countries," MPRA Paper 108535, University Library of Munich, Germany.
    5. Harashima, Taiji, 2021. "Economic Inequality and Heterogeneous Success Rates of Investment," MPRA Paper 110688, University Library of Munich, Germany.

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    More about this item

    Keywords

    Sustainability; Heterogeneity; Social Optimality; Social welfare; Social welfare function; Inequality; Evolution;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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