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Dynamics of Income Distribution

  • Hongyi Li

    (Chinese University of Hong Kong)

  • Danyang Xie

    (Hong Kong University of Science and Technology)

  • Heng-fu Zou

    (World Bank)

In this paper, we have obtained closed-form solutions in Cass-Koopmans growth models with heterogeneous agents. The relationship between the form of production function and the dynamics of income distribution is made explicit. We then use this relationship to determine what production structure is simultaneously consistent with facts on growth and income inequality. Our empirical findings give support to models with decreasing returns in the reproducible factor.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0210001.

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Length: 31 pages
Date of creation: 04 Oct 2002
Date of revision:
Handle: RePEc:wpa:wuwpge:0210001
Note: Type of Document - PDF; prepared on PC; to print on HP; pages: 31; figures: Included
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  1. Philippe Aghion & Peter Howitt, 1990. "A Model of Growth Through Creative Destruction," NBER Working Papers 3223, National Bureau of Economic Research, Inc.
  2. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
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  4. Xie, Danyang, 1991. "Increasing Returns and Increasing Rates of Growth," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 429-35, April.
  5. Atkeson, Andrew & Lucas, Robert E, Jr, 1992. "On Efficient Distribution with Private Information," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 427-53, July.
  6. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
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  8. Shantayanan Devarajan & Danyang Xie & Heng-fu Zou, 1999. "Should Public Capital Be Subsidized or Provided?," CEMA Working Papers 75, China Economics and Management Academy, Central University of Finance and Economics.
  9. Caselli, F. & Ventura, J., 1996. "A Representative Consumer Theory of Distribution," Working papers 96-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
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  12. Sergio T. Rebelo, 1990. "Long Run Policy Analysis and Long Run Growth," NBER Working Papers 3325, National Bureau of Economic Research, Inc.
  13. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
  14. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  15. Hongyi Li & Heng-fu Zou, 1998. "Income Inequality Is Not Harmful for Growth: Theory and Evidence," CEMA Working Papers 74, China Economics and Management Academy, Central University of Finance and Economics.
  16. Chatterjee, Satyajit, 1994. "Transitional dynamics and the distribution of wealth in a neoclassical growth model," Journal of Public Economics, Elsevier, vol. 54(1), pages 97-119, May.
  17. Lucas, Robert E, Jr, 1992. "On Efficiency and Distribution," Economic Journal, Royal Economic Society, vol. 102(411), pages 233-47, March.
  18. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  19. Giuseppe Bertola, 1991. "Factor Shares and Savings in Endogenous Growth," NBER Working Papers 3851, National Bureau of Economic Research, Inc.
  20. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  21. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  22. Lindert, Peter H. & Williamson, Jeffrey G., 1985. "Growth, equality, and history," Explorations in Economic History, Elsevier, vol. 22(4), pages 341-377, October.
  23. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  24. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  25. Adelman, Irma & Robinson, Sherman, 1989. "Income distribution and development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 19, pages 949-1003 Elsevier.
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