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Growth, Income Inequality, and Fiscal Policy: What Are the Relevant Trade‐offs?
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In this paper, the authors developed an endogenous growth model with elastic labor supply, in which agents differ in their initial endowments of physical capital, and the growth rate and the distribution of income were jointly determined.Abstract:
We develop an endogenous growth model with elastic labor supply, in which agents differ in their initial endowments of physical capital. In this context, the growth rate and the distribution of income are jointly determined. We then examine the distributional impact of different ways of financing an investment subsidy. Policies aimed at increasing the growth rate result in a more unequal distribution of pre-tax income, consistent with the positive correlation between income inequality and growth observed in the recent empirical literature. However, there is no conflict between efficiency and equity if inequality is measured in terms of the distribution of welfare.read more
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Joint determinants of fiscal policy, income inequality and economic growth
TL;DR: In this article, the relationship between income inequality and economic growth through fiscal policy is analyzed and two systems of structural equations with error components through which gross income inequality determines different fiscal policy outcomes, which subsequently affects the evolution of economic growth and net income inequality.
Income inequality and economic growth
TL;DR: In this paper, the authors focus on the Zusammenhang zwischen Einkommensungleichheit and Wirtschaftswachstum darzulegen.
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Economic growth and inequality: the role of fiscal policies*
TL;DR: In this article, the impact of different instruments of fiscal policy on economic growth as well as on income inequality was analyzed using an unbalanced panel of 43 upper-middle and high income countries for the period 1972-2006.
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Distributional Dynamics in a Neoclassical Growth Model: The Role of Elastic Labor Supply *
TL;DR: In this article, the authors examine the evolution of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowment and where the labor supply is endogenous.
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The impact of fiscal policy on profits
TL;DR: In this paper, the authors focus on the effect of government spending on output and other variables in the context of structural VAR models (see Perotti 2008 for a survey) and focus on an important but relatively under-investigated channel of fiscal policy transmission.
References
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Journal ArticleDOI
Increasing Returns and Long-Run Growth
TL;DR: In this paper, the authors present a fully specified model of long-run growth in which knowledge is assumed to be an input in production that has increasing marginal productivity, which is essentially a competitive equilibrium model with endogenous technological change.
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Income Distribution and Macroeconomics
Oded Galor,Joseph Zeira +1 more
TL;DR: The authors analyzes the role of wealth distribution in macroeconomics through investment in human capital and shows that the initial distribution of wealth affects aggregate output and investment both in the short and in the long run, as there are multiple steady states.
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Distributive Politics and Economic Growth
Alberto Alesina,Dani Rodrik +1 more
TL;DR: This paper analyzed the relationship between economics and politics and concluded that inequality is conducive to the adoption of growth-retarding policies, and presented cross-country evidence consistent with it. But their analysis focused on how an economy's initial configuration of resources shapes the political struggle for income and wealth distribution, and how that, in turn, affects long run growth.
Book
Is inequality harmful for growth
Torsten Persson,Guido Tabellini +1 more
TL;DR: In this article, a theoretical model for the relationship between inequality and economic growth is proposed, and the model implications are supported by the evidence that both historical panel data and post-war cross-sectional data indicate a significant and large negative relation between inequalities and growth.
Journal ArticleDOI
Inequality and Growth in a Panel of Countries
TL;DR: In this paper, a broad panel of countries showed little overall relation between income inequality and rates of growth and investment, while the Kuznets curve is a clear empirical regularity, but it does not explain the bulk of variations in inequality across countries or over time.