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Public Capital, Income Distribution and Growth

  • Getachew, Yoseph

    ()

    (UNU-MERIT)

Public capital investment plays an important role in long run growth through enhancing productivity and complementing the accumulation of private inputs. Under appropriate conditions, public capital could also have important implications for income distribution dynamics. When the credit market is imperfect and there are diminishing returns to private factors, income inequality is negatively related to economic growth. The dynamics of income distribution is determined by relative income shares of private input, wherever initial endowment differs among individuals. Therefore, if the provision of public capital has an effect on relative income shares of private inputs, then it will have an effect on income distribution dynamics. In this case, public capital once more becomes an important determinant of long-run growth through its indirect effect on income distribution. The paper studies this and other interesting issues with respect to public capital, income inequality and economic growth.

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File URL: http://www.merit.unu.edu/publications/wppdf/2008/wp2008-056.pdf
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Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 056.

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Date of creation: 2008
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Handle: RePEc:unm:unumer:2008056
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