User menu

Accès à distance ? S'identifier sur le proxy UCLouvain

Growth and distribution in an AK-model with endogenous impatience

Primary tabs

Borissov, Kirill [European University in St Petersburg] Lambrecht, Stéphane [UCL]

This paper combines the classical approach to inequality, based on the division of society into classes with different saving propensities, and the social conflict approach, in which inequality inflicts costs to growth.We assume that each consumer’s discount factor is endogenously determined through two channels: (1) it is positively related to the consumer’s relative wealth, and (2) negatively affected by an aggregate measure of social conflict.Unlike inmodelswith exogenous discount rates, steady state equilibria are indeterminate and the set of equilibria is a continuum parameterized by an index of income inequality. Under reasonable assumptions, the relationship between growth and inequality has an inverted-U shape.

Document type Article de périodique (Journal article)
Access type Accès interdit
Publication date 2009
Language Anglais
Journal information "Economic Theory" - Vol. 39, no. 1, p. 93-112 (Avril 2009)
Peer reviewed yes
Publisher Springer
issn 0938-2259
e-issn 1432-0479
Publication status Publié
Affiliations European University in St Petersburg - Institute for Economics and Mathematics
UCL - EUEN/CORE - Center for operations research and econometrics
Keywords Wealth distribution ; Intertemporal choice ; Growth ; Development
Links
  1. Aghion P. and Bolton P. (1997). A theory of trickle-down growth and development. Rev Econ Stud 64: 151–172
  2. Alesina A. and Perotti R. (1996). Income distribution, political instability and investment. Eur Econ Rev 40: 1203–1228
  3. Alesina A. and Rodrik A. (1994). Distributive politics and economic growth. Q J Econ 109: 465–490
  4. Barro R. (2000). Inequality and growth in a panel of countries. J Econ Growth 5: 5–32
  5. Becker R. (1980). On the long-run steady state in a simple dynamic model of equilibrium with heterogeneous households. Q J Econ 95: 375–82
  6. Benhabib J. and Przeworski A. (2006). The political economy of redistribution under democracy. Econ Theory 29: 271–290
  7. Bertola G. (1993). Factor shares and savings in endogenous growth. Am Econ Rev 83: 1184–1198
  8. Bhattacharya J. (1998). Credit market imperfections, income distribution and capital accumulation. Econ Theory 11: 171–200
  9. Blanchard O.J. and Fischer S. (1989). Lectures on Macroeconomics. MIT, Cambridge
  10. Bleaney M. and Nishiyama A. (2004). Income inequality and growth—does the relationship vary with the income level?. Econ Lett 84: 349–355
  11. Borissov K. (2002). Indeterminate steady-state equilibria in a one-sector model. Econ Lett 77: 125–130
  12. Borissov, K.: Aggregate Models of Economic Growth and Distribution (in Russian). St Petersburg Institute for Economics and Mathematics (2005)
  13. Borissov, K., Lambrecht, S.: Growth and distribution in models with endogenous impatience. European University at St Petersburg, Department of Economics, Working Paper # 2005/03 (2005)
  14. Bourguignon F. (1981). Pareto superiority of unegalitarian equilibria in Stiglitz’ model of wealth distribution with convex saving function. Econometrica 49: 1469–1475
  15. Bourguignon, F.: Crime as a social cost of poverty and inequality: a review focusing on developing countries. In: Yussuf S., Evenett S., Wu W. (eds.) Facets of globalization : international and local dimensions of development, Washington, DC, World Bank (2001)
  16. Carrol Ch., Overland J. and Weil D. (2000). Saving and growth with habit formation. Am Econ Rev 90: 341–355
  17. Chen B.-L. (2003). An inverted-U relationship between inequality and long-run growth. Econ Lett 78: 205–212
  18. Chen, B.-L.: Multiple BGPs in a growth model with habit persistence. J Money Credit banking (2006), forthcoming
  19. Cole H.L., Mailath G.J. and Postlewaite A. (1992). Social norms, saving behavior, and growth. J Polit Econ 100: 1092–1125
  20. Corneo G. and Jeanne O. (2001). Status, the distribution of wealth and growth. Scand J Econ 103: 283–293
  21. Cowell F.A. (1995). Measuring Inequality, 2nd edn. Harvester Wheatsheaf, Hemel Hempstead
  22. Galor O. and Zeira J. (1993). Income distribution and macroeconomics. Rev Econ Stud 60: 35–52
  23. Galor O. and Moav O. (2004). From physical to human capital accumulation: inequality and the process of development. Rev Econ Stud 71: 1001–1026
  24. García-Peñalosa C. and Turnovsky S.J. (2006). Growth and income inequality: a canonical model. Econ Theory 28: 25–49
  25. Fajnzylber, P., Lederman, D., Loayza, N.: Determinants of crime rates in Latin America and the world. A World Bank Latin America and the Caribbean Viewpoints Series Paper. Washington, DC: World Bank (1998)
  26. Fershtman C., Murphy K.M. and Weiss Y. (1996). Social status, education and growth. J Polit Econ 106: 108–132
  27. Forbes K. (2000). A reassessment of the relationship between inequality and growth. Am Econ Rev 90: 869–887
  28. Frankel M. (1962). The production function in allocation and growth: a synthesis. Am Econ Rev 52: 995–1022
  29. Harrison G.W., Lau M.I. and Williams M.B. (2002). Estimating individual discount rates in Denmark: a field experiment. Am Econ Rev 92: 1606–1617
  30. Kaldor N. (1956). Alternative theories of distribution. Rev Econ Stud 23: 94–100
  31. Kaldor N. (1957). A model of economic growth. Econ J 67: 591–624
  32. Keynes J.M. (1920). The Economic Consequences of the Peace. Macmillan, New York
  33. Koopmans T.C. (1986). Representation of preference ordering over time. In: Mcguire, C.B. and Radner, R. (eds) Decision and Organization, (2nd edn). University of Minnesota Press, Minneapolis
  34. Lambrecht St., Michel Ph. and Vidal J.-P. (2005). Public pensions and growth. Euro Econ Rev 49: 1261–1281
  35. Lawrence E.C. (1991). Poverty and the rate of time preference: evidence from panel data. J Polit Econ 99: 54–75
  36. Lewis W.A. (1954). Economic development with unlimited supply of labor. Manchester Sch 22: 139–191
  37. Li H. and Zou H. (1998). Income inequality is not harm for growth: theory and evidence. Rev Develop Econ 2: 318–334
  38. Mankiw N.G. (2000). The savers-spenders theory of fiscal policy. Am Econ Rev 90: 120–125
  39. Michel P. and Pestieau P. (1998). Fiscal policy in a growth model with both altruistic and non-altruistic agents. Southern Econ J 64: 682–697
  40. Partridge M. (1997). Is inequality harmful for growth: comment. Am Econ Rev 87: 1019–1032
  41. Pasinetti Luigi L., Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth, 10.2307/2296303
  42. Perotti R. (1996). Growth, income distribution and democracy: what the data say. J Econ Growth 1: 149–187
  43. Persson T. and Tabellini G. (1994). Is inequality harmful for growth? Theory and evidence. Am Econ Rev 84: 600–621
  44. Romer P.M. (1986). Increasing returns and long-run growth. J Polit Econ 94: 1002–1037
  45. Ryder E. and Heal G. (1973). Optimal growth with intertemporally dependent preferences. Rev Econ Stud 40: 1–33
  46. Samwick A.A. (1998). Discount rate homogeneity and social security reform. J Develop Econ 57: 117–146
  47. Schlicht E. (1975). A neoclassical theory of wealth distribution. Jahrb Natl Okon Stat 189: 78–96
  48. Shen L. (2007). When will a dictator be good?. Econ Theory 31: 343–366
  49. Shi S. and Epstein L. (1993). Habits and time preference. Int Econ Rev 34: 61–84
  50. Smetters K. (1999). Ricardian equivalence: long-run Leviathan. J Public Econ 73: 395–421
  51. Smith A. (1776). The wealth of nations. The Modern Library, New York
  52. Sorger G. (2000). Income and wealth distribution in a simple model of growth. Econ Theory 16: 23–42
  53. Uzawa H. (1968). Time preference, the consumption function and optimal asset holdings. In: Wolf, J.N. (eds) Value, Capital and Growth; Papers in honor of Sir John Hicks, pp 485–504. University of Edinburgh Press, Edinburgh
Bibliographic reference Borissov, Kirill ; Lambrecht, Stéphane. Growth and distribution in an AK-model with endogenous impatience. In: Economic Theory, Vol. 39, no. 1, p. 93-112 (Avril 2009)
Permanent URL http://hdl.handle.net/2078.1/28835