Investment Criteria, Productivity, and Economic Development

Galenson, Walter; Leibenstein, Harvey

doi:10.2307/1885846

Cited by 128 publications

(31 citation statements)

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“…Then, more unequal economies growth faster than economies characterised by a more equitable income distribution if economic growth is related to the proportion of national income that is saved (see, among others, Galenson and Leibenstein, 1955). Stiglitz (1969) andBourguignon (1981) formalised this argument in a Solow growth model with a linear saving function and a convex saving function, respectively.…”

Section: Previous Literaturementioning

confidence: 99%

Inequality of opportunity and growth

Marrero

Rodríguez

2013

Journal of Development Economics

226

129

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Theoretical models and empirical studies exploring the relationship between income inequality and growth reach a disappointing inconclusive answer. We postulate in this paper that one reason for this inconclusive result is that income inequality consist at least in two different sorts of inequality, inequality of opportunity and effort. These two types of inequality would affect growth through opposite channels. As a result, the relationship between income inequality and growth could be positive or negative depending on which kind of inequality is more relevant. We test this proposal using depurated data of the PSID database for 24 US states from 1980 to 2000. We estimate regressions that relate growth with overall income inequality, inequality of opportunity and other widespread used control variables. We find robust support for a negative relationship between inequality of opportunity and growth and a positive relationship between growth and income inequality.JEL Classification: D63, H00.Key Words: income inequality; inequality of opportunity; economic growth. INTRODUC TIONAn upsurge literature on income inequality and growth has emerged over the last two decades. The development of endogenous growth theory has provided the tools to handle the relationships between income inequality and economic growth within a dynamic equilibrium setting. Relaxing the representative-agent assumption raises two main questions. The first concerns the effects of income and wealth inequality on growth. The second addresses the reverse causation from growth to inequality, and disputes about the Kuznets (1955) hypothesis, according to which development and growth should eventually reduce income inequality.We concentrate on the first channel of influence, that is, on the effects of income inequality on growth. In this respect, two sets of growth models have been proposed in the literature: models where inequality is necessary for growth and models where inequality is harmful for growth. As it will become clear in the next section, the prevalence of a positive or negative relationship between income inequality and growth from a theoretical perspective is not possible since income inequality may affect economic growth in both directions through many different channels. For example, wealth and human capital heterogeneity across individuals produces a negative relationship between income inequality and growth because capital markets are imperfect. Meanwhile, income inequality may courage people s effort and, therefore, economic growth. In this manner, opposite forces give rise to a confusing picture of the relationship between economic growth and inequality. Worst still, the empirical evidence on the link from initial income inequality to future growth is mixed. Thus, there is a general inconclusiveness of cross-sectional and panel data studies of the relationship between income inequality and growth. In this respect, Ehrhart (2009) acknowledges in a recent survey on this topic that the overall rather disappointing econometric ...

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Section: Previous Literaturementioning

confidence: 99%

Inequality of opportunity and growth

Marrero

Rodríguez

2013

Journal of Development Economics

226

129

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“…8 Pasinetti (1961-2) claimed that the propensity to consume is lower for workers than for capitalists, Kaldor (1955-6) believed that it is lower for wages than for profits, while the scholars discussed here seemed to assume that in general the marginal propensity declines with income. Galenson and Leibenstein (1955) were probably the first to argue that a highly unequal income distribution was necessary for savings that would facilitate investment and growth. 9 Note that this reasoning implies that the impact of mean preserving inequality on growth is ambivalent: in the Kaldor-Pasinetti models, inequality promotes growth to the extent to which it increases incomes of those who save more but in the median voter models it slows down growth to the extent to which the political system responds to demands for redistribution.…”

Section: Against Democracy: Dictatorship Insulates the State From Parmentioning

confidence: 99%

Political Regimes and Economic Growth

Przeworski

Limongi

1993

Journal of Economic Perspectives

904

279

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Does democracy in the political realm foster or hinder economic growth? Our discussion of this question begins with a review of arguments in favor of and against democracy. Then we summarize statistical studies in which political regime is included among determinants of growth and identify some methodological problems entailed in such studies. The conclusion is that social scientists know surprisingly little: our guess is that political institutions do matter for growth, but thinking in terms of regimes does not seem to capture the relevant differences.

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“…The key contributions were (i) the 'social marginal production' criterion (Kahn 1951;Chenery 1953), (ii) the 'marginal per capita investment quotient' criterion (Galenson and Leibenstein 1955) and (iii) the 'marginal growth contribution' criterion (Eckstein 1957).…”

Section: Data Systemsmentioning

confidence: 99%

The Evolution of the Development Doctrine, 1950–2005

Thorbecke¹

2007

Advancing Development

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The evolution of the development doctrine over the last six decades is analysed in some detail in this paper. The development doctrine is defined as the body of knowledge consisting of four interrelated components: (1) the prevailing development objectives; (2) the conceptual state of the art relating to development theories, models, techniques and applications; (3) the underlying data system; and (4) the resulting development strategy. The main contributions and changes in these four components are traced through, decade by decade, starting with the 1950s.

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Investment Criteria, Productivity, and Economic Development

Cited by 128 publications

References 0 publications

Inequality of opportunity and growth

Inequality of opportunity and growth

Political Regimes and Economic Growth

The Evolution of the Development Doctrine, 1950–2005

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