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Is Rentier Capitalism That Bad? Rent, Efficiency and Inequality Dynamics

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  • Mabrouk, Mohamed

Abstract

The current economic context shows a tendency to inequality and rather weak growth. Rent-seeking behavior is often blamed for that. The purpose of this paper is to analyze the consequences, on the accumulation trajectory, of the existence of a rent levied by the rich on the poor. The model is inspired by the articles Stiglitz 1969, Schilcht 1975 and Bourguignon 1981. In particular, convex saving is used. We seek to see to what extent the introduction of a rent may call into question the Pareto-superiority of inequality proved by Bourguignon 1981 or alter the risk of decline highlighted in Mabrouk 2016. Within the limits of the assumptions of the model and of the numerical simulations carried out, we arrive at interesting and rather unexpected observations. Namely, a moderate rent levied by the rich on the poor may not only allow a Pareto-improvement of the economy and prevent the risk of decline, but also, it may unlock the economy from under-accumulation trap even if initial capital endowment is insufficient. The disadvantages of such a rent for the poor are felt only if the economy approaches or exceeds the golden rule where the net marginal productivity of capital is zero.

Suggested Citation

  • Mabrouk, Mohamed, 2017. "Is Rentier Capitalism That Bad? Rent, Efficiency and Inequality Dynamics," MPRA Paper 81565, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:81565
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    References listed on IDEAS

    as
    1. Stiglitz, Joseph E, 1969. "Distribution of Income and Wealth among Individuals," Econometrica, Econometric Society, vol. 37(3), pages 382-397, July.
    2. Joseph E. Stiglitz, 2015. "New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part I. The Wealth Residual," NBER Working Papers 21189, National Bureau of Economic Research, Inc.
    3. Joseph E. Stiglitz, 2015. "New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part IV: Land and Credit," NBER Working Papers 21192, National Bureau of Economic Research, Inc.
    4. Mabrouk, Mohamed Ben Ridha, 2016. "The paradox of thrift in an inegalitarian neoclassical economy," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 12(3).
    5. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 2008. "Why Is Rent-Seeking So Costly to Growth?," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 213-218, Springer.
    6. Joseph E. Stiglitz, 2015. "New Theoretical Perspectives on the Distribution of Income and Wealth among Individuals: Part II: Equilibrium Wealth Distributions," NBER Working Papers 21190, National Bureau of Economic Research, Inc.
    7. Bourguignon, Francois, 1981. "Pareto Superiority of Unegalitarian Equilibria in Stiglitz' Model of Wealth Distribution with Convex Saving Function," Econometrica, Econometric Society, vol. 49(6), pages 1469-1475, November.
    8. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
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    More about this item

    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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