1996
DOI: 10.1007/bf00150199
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Redistribution and growth: Pareto improvements

Abstract: This paper analyzes the relationship between income distribution and economic growth. It introduces heterogeneous households who have preferences for leisure into Grossman and Helpman's model of endogenous growth (in which income distribution has no effect on economic growth). Wealth distribution affects the endogenous rate of growth as the labor supply of each individual responds inversely to his permanent income. When the labor Engel curve is concave (convex), unequal wealth distribution decreases (increases… Show more

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Cited by 35 publications
(32 citation statements)
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“…where the second equality uses (8) and (16). Therefore, the steady-state growth rate of technology is…”
Section: Propositionmentioning
confidence: 99%
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“…where the second equality uses (8) and (16). Therefore, the steady-state growth rate of technology is…”
Section: Propositionmentioning
confidence: 99%
“…This is the symmetric interest-rate e¤ect of patent protection and R&D subsidy s on income inequality I . However, these two policy instruments have an additional e¤ect on income inequality captured by the term (1 s) in (28), and this e¤ect is asymmetric between and s. To understand this asymmetric e¤ect, one can consider the ratio a t =w t = v t =w t = (1 s) =' derived from (9), (13) and (16). Interestingly, a t =w t is decreasing in R&D subsidy s but increasing in patent protection .…”
Section: Propositionmentioning
confidence: 99%
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“…6 Inequality may 4 This chapter, written from a macro-growth perspective, focuses on the literature that explores the e¤ect of inequality on the development process, rather than on the forces that prevent (Loury, 1981) or generate persistent inequality within an economy (Benabou, 1996;Durlauf, 1996a;Fernández and Rogerson, 1996;Mookherjee and Ray, 2003) or across economies (Galor and Mountford, 2008;Galor, 2010). 5 An additional line of research that has generated less attention examined the e¤ect of inequality on aggregate demand, innovations, and growth, in the presence of non-homothetic preferences (Chou and Talmain, 1996;Matsuyama, 2000;Foellmi and Zweimuller, 2006). 6 Although the provision of public education mitigates the e¤ect of inequality on human capital formation, the 2 therefore adversely a¤ect macroeconomic activity and economic development in the short-run, and due to intergenerational transfers and their e¤ect on the persistence of inequality, it may generate a detrimental e¤ect on economic development in the long-run as well.…”
Section: The Credit Market Imperfections Channelmentioning
confidence: 99%