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Growth and Inequality: Dependence on the Time Path of Productivity Increases (and other Structural Changes)

  • Manoj Atolia

    (Florida State University)

  • Santanu Chatterjee

    (University of Georgia)

  • Stephen Turnovsky

This paper examines the significance of the time path of a given productivity increase on growth and inequality. Whereas the time path impacts only the transitional paths of aggregate quantities, it has both transitional and permanent consequences for wealth and income distribution. Hence, the growth–inequality tradeoff generated by a given discrete increase in productivity contrasts sharply with that obtained when the same productivity increase occurs gradually. The latter can generate a Kuznets-type relationship between inequality and per-capita income. Our results suggest that economies with similar aggregate structural characteristics may have different outcomes for income and wealth inequality, depending on the nature of the productivity growth path.

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Paper provided by University of Washington, Department of Economics in its series Working Papers with number UWEC-2009-23.

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Date of creation: Jul 2009
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Handle: RePEc:udb:wpaper:uwec-2009-23
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