Top PDF A Positive Theory of Economic Growth and the Distribution of Income

A Positive Theory of Economic Growth and the Distribution of Income

A Positive Theory of Economic Growth and the Distribution of Income

The model answers the puzzling result emphasized by Piketty (2014). As did Karl Marx, Piketty concludes that because the return on capital repeatedly exceeds the growth rate of developed economies and does not change much over time, developed economies will face ever-increasing capital stocks. Since returns to capital go mainly to the highest income groups, the distribution of income widens over time and will continue to do so. Another possibility, of course, is that capital owners either consume or donate to charity the capital output in excess of the economic growth rate, so that capital does not accumulate faster than the economy grows. The puzzle for Piketty’s conjecture is why there is no evidence anywhere that the capital stock has approached saturation. That fact opens the way for an alternative explanation of the relative constancy of the return to capital. Unlike Piketty who bases his conclusion on a comparison of the before tax income of the top 1 or 0.1 percent to before redistribution to the lowest income groups, we compare incomes available for consumption by the di¤erent income classes. Piketty’s choice greatly overstates what has happened in developed countries. Our measure is more closely related to income after
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Unemployment and Income-Distribution Effects of Economic Growth: A Minimum-Wage Analysis with Optimal Saving

Unemployment and Income-Distribution Effects of Economic Growth: A Minimum-Wage Analysis with Optimal Saving

The specter of a slowdown in economic growth has recently caught the attention of economists and policymakers alike. Possible reasons for such a slowdown are plentiful. For example, Summers (2015) revives the idea of secular stagnation, whereby growth slows because of insufficient demand. On the other hand, Gordon (2012) questions whether productivity- enhancing innovations can continue on a scale observed in the past, and he identifies a host of other issues (such as demographics) that may further decrease the growth rate in the United States (and elsewhere). In any case, the potential ramifications of slower growth are wide- ranging and important. For instance, unemployment may rise, as predicted by Okun’s Law, and the distribution of income may become severely skewed, as argued by Piketty (2014).
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An integrated approach to climate change, income distribution, employment, and economic growth

An integrated approach to climate change, income distribution, employment, and economic growth

steady state could arise. Moreover, destabilizing positive feedbacks in the system may simply make it diverge. Climate policy has the potential to lower the carbon intensity of output but also to increase energy efficiency. Both policy instruments have stabilizing effects. Our analysis extends the verbal analysis of Rezai, Taylor, and Mechler (2013) and presents a consistent modeling framework for the questions outlined above. Section 2 introduces the essential elements of a demand-driven growth model which incorporates energy use and greenhouse gas emission. Section 3 discusses the short run determination of output. Section 4 introduces income distribution to the model. Sections 5 and 6 turn to the growth of labor productivity and the dynamics of output and capital stock. Section 7 brings in energy use and the dynamics of greenhouse gas accumulation. Section 8 presents the analysis of the interaction of greenhouse gas accumulation and economic growth and section 9 concludes.
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Economic growth, income distribution, and poverty in Poland during transition

Economic growth, income distribution, and poverty in Poland during transition

This paper attempts to analyze the linkages between macroeconomic policies and economic growth variables, their movement over time, and their impact on poverty in the case of Poland. Poland, a middle-income country, is of particular interest because its data sources allow for a relatively detailed analysis of such developments, but also because of macroeconomic environment and the economic growth variables show a relatively sizable degree of variance. In addition, Poland has struggled in the last few years to reduce poverty while still experiencing positive economic growth. The paper will show that in Poland poverty-reducing growth depends heavily on the ability of the economy to generate jobs. During the early years of transition, net job growth was positive, but after the Russian crisis of 1998, productivity gains were accomplished mostly through labor shedding, consequently increasing poverty in Poland. In addition, the paper identifies how fiscal and social protection policies impact Poland’s income distribution and poverty trends.
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Income distribution, technical change, and economic growth: A two-sector Kalecki--Kaldor approach

Income distribution, technical change, and economic growth: A two-sector Kalecki--Kaldor approach

Kaleckian models have analysed the relationship between functional income distribution and economic growth. The analysis of the existence and stability of wage-led demand (WLD) and profit-led demand (PLD) regimes has attracted much research interest (Lavoie and Stockhammer (2013); Setterfield (2016); Nishi and Stockhammer (2020a,b)). Since effective demand is the driving force of the economic growth in these models, they are characterised as demand-led growth models (Blecker and Setterfield (2019)). Over time, demand-led growth models have been extended in various ways, with endogenous change in labour productivity, in particular, being recently introduced (Storm and Naastepad (2017); Tavani and Zamparelli (2017); Fazzari et al. (2020)). As these models are mostly built in an aggregate style, as shown by Tavani and Zamparelli (2017), they do not consider the dynamics of production and expenditure specific to each industry or the associated feedback between sectors.
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Income Distribution, Poverty Trap and Economic Growth

Income Distribution, Poverty Trap and Economic Growth

4.1. The Optimal Income Redistribution Policy It is interesting to analyze what kind of income redistribution favors economic growth. For analytical purpose, assume that income follows a uniform distribution U[ µ σ µ σ − , + ] . Then, the variance of income is σ 2 3 and the ratio of the agents who can receive education is µ σ + − $y 2 σ . Consider the welfare implications of a redistribution policy where government alters the variance.

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Economic Growth, Income Distribution, and Climate Change

Economic Growth, Income Distribution, and Climate Change

Economic Growth, Income Distribution, and Climate Change * Armon Rezai † , Lance Taylor ‡ , and Duncan Foley ‡ Abstract: We present a model based on Keynesian aggregate demand and labor productivity growth to study how climate damage affects the long-run evolution of the economy. Climate change induced by greenhouse gas lowers profitability, reducing investment and cutting output in the short and long runs. Short-run employment falls due to deficient demand. In the long run productivity growth is slower, lowering potential income levels. Climate policy can increase incomes and employment in the short and long runs while a continuation of business-as-usual leads to a dystopian income distribution with affluence for few and high levels of unemployment for the rest.
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Personal Income Distribution And Economic Growth: The Case Of Brazilian Municipalities

Personal Income Distribution And Economic Growth: The Case Of Brazilian Municipalities

Keywords. Inequality; Development; Municipal Economic Growth JEL Code: D63, O47, O11, R13 1. Introduction The role of income distribution in modern societies has become a central issue in the public debate after the 2008’s crisis. This debate has been boosted by the success of Thomas Piketty’s book, “Capital in the Twenty First Century” (Piketty, 2014). An essential part of this debate regards to the role of inequality in the process of development. On the one hand, the income inequality can be interpreted as an economic development process’ outcome, since the technical progress tends to generate high monopoly profits which, in the last instance, can cause a more unequal society. On the other hand, the income inequality can drive bad incentives regarding human capital accumulation and technical progress, since this income inequality is generated by a set of bad institutions or taking place in a world of heterogeneity in the talents (CHIU, 2001).
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Study on Imbalance Development of China’s Economic Growth and Income Distribution

Study on Imbalance Development of China’s Economic Growth and Income Distribution

Accompanied with China’s current rapid economic growth, the share of residential income in gross national income is shrinking, and the income distribution gap is being larger. As can be said that, if we ignore the problem of income distribution deformities, it will not only endanger the nation’s survival, development and long-term stability, but also will determine whether the future of the sustainability of rapid economic growth. Therefore, in order to solve this big and serious problem, this article points out that firstly we should update the idea of economic growth and establish “shared development model”, which is necessary to emphasize the growth of the economy itself, while strengthening the social well-being development, that is to say, pursuing the unity of economic growth and social development. Secondly, it is vigilant that the government shall avoid premature “welfare catch-up” while Improving the social security system. According to China’s present circumstances, raising the level of social security should be compatible with the development stage. Finally, as far as possible in order to ensure a fair distribution of income, government shall strengthen the roles of regulating the distribution of income by improving the tax system reinforcing the tax collection efforts on high income level groups.
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An Integrated Approach to Climate Change, Income Distribution,

Employment, and Economic Growth*

An Integrated Approach to Climate Change, Income Distribution, Employment, and Economic Growth*

this issue) discuss the history of working time reductions and their potential in mitigating distributional conflict in a stagnant economy. Our main aim is to present a model that combines biophysical limits in the form of atmospheric greenhouse gas concentration and Post-Keynesian growth theory. The model is set up in terms of two “state” or “slow” variables that evolve over time – the capital/population ratio and the level of GHG concentration, which capture the underlying conflict between capital accumulation and climate change. Following another convention in growth theory, in the model’s “short run” of about a decade both are treated as constant. This allows us to determine the effect of capital accumulation and GHG concentration on the rapidly adjusting or “fast” variables of economic interest such as the income, distribution, employment, and the level of labor productivity. Our model stays within economic growth theory which implies that we neither address societal problems associated with a low-carbon transition as explored in Roepke (2015) nor question the importance of economic growth for social welfare despite the recent empirical evidence (Howarth and Kennedy, 2015).
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Income Distribution and Economic Growth: A Critical Approach

Income Distribution and Economic Growth: A Critical Approach

The aim of this paper is to review the Kaleckian and post-Kaleckian literature on income distribution and economic growth and question the extent to which they analyse countries’ economic regimes and economic performances properly and ap- propriately to understand countries’ economic performances and their relationship to income distribution. More specifically, the objective is to question whether analysing an economy as wage-led or profit-led is the most appropriate way to understand its dynamics and the changes generated by the neoliberal reforms after breaking down the political/institutional agreement that were important in the wage-led growth model that occurred during the post Second World War. The debate focuses on the inclusion of profit margin in the investment function as a way to characterize the ef- fective demand regime in the neoliberal era as a profit-led growth regime. Our argu- ment is that this inclusion is not able to evaluate properly the countries’ economic growth in terms of the consistency between its effective demand regimes and income distribution.
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Economic growth and income distribution implications of public spending and tax decisions

Economic growth and income distribution implications of public spending and tax decisions

1. Introduction Extensive literature shows that both the level and composition of public expenditures and revenues have implications for economic development. There are two main strands of the literature. The discussion on the short-term impacts of public finance decisions was especially active after the 2008 global crisis and the subsequent European financial and economic crises, when several countries implemented fiscal consolidation strategies. This literature is frequently referred as the ‘fiscal multiplier’ discussion (eg Auerbach and Gorodnichenko, 2012; Blanchard and Leigh, 2013). The other main relevant theme in the literature focuses on the longer-term impacts of the public finance structure on the level, or even the growth, of the economy, which can be referred to the ‘quality of public finance’ discussion (eg European Commission, 2012). The composition of, and changes in, tax revenues have the greatest impact when taxes are paid. Thereby, tax compliance and the broadness of tax bases are similarly important issues, as well as the effectiveness of public sector spending, which underpins all public sector actions. In this paper I combine public finance structure and effectiveness issues, which can influence aggregate economic growth, with their impacts on the distribution of income. Striving for fairness in income distribution is crucial for societies to be stable and for citizens not to feel disenchanted. The concept of ‘inclusive growth’ provides a conceptual framework to analyse the social implications of economic growth. Growth is considered inclusive if it creates opportunities for all segments of the population and treats them fairly 2 . To understand inclusive growth, we must first understand inequality, which has two crucial categories. The first is the inequality of opportunity in access to education, jobs, healthcare, finance or the judicial system, for example. The second is inequality of outcomes, such as income, wealth, health and educational attainment.
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Economic growth and income distribution with heterogeneous preferences on the real exchange rate

Economic growth and income distribution with heterogeneous preferences on the real exchange rate

Therefore, an interesting feature of the model is that it provides an explanation for a stable medium-run real exchange rate based on the tradition of analyzing the evolution of prices (among which the nominal exchange rate) from the standpoint of the distributive conflict. While macrodynamic models generally assume that there is an exogenous level of the real exchange rate acting as a medium (or long) run attractor, our model endogenously produces an equilibrium real exchange rate stemming from evolving heterogeneous preferences over the exchange rate by the government and capitalists. In fact, the level at which the real exchange rate will become stable in the medium run can be traced back to reasonable assumptions about the preferred levels by capitalists and the monetary authority and their corresponding reaction functions.. Moreover, the dynamic framework set forth above is flexible enough to allow for changes in behavioral assumptions related to domestic and external conditions (more or less intense foreign competition) and evolving objectives by the government (giving more weight either to income distribution, stabilization or international competitiveness and growth).
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Effect of Government Spending on Transportation Sector against Economic Growth and Income Distribution

Effect of Government Spending on Transportation Sector against Economic Growth and Income Distribution

The next result was found positive effects and decreasing of density of highways to economic growth, there is no strong evidence to support the existence of spillover effects. Results from the 1996 model Table 2 shows the average density of the neighboring district road has been negative and statistically significant for some period. Amadi, C., N. Nyekachi, Nyenke, C. (2013), conducted research on Public Spending on Transport Infrastructure and Economic Growth in Nigeria, 1981-2010, aims to examine the role of government spending on transportation infrastructure to economic growth in Nigeria, using Ordinary Least Square (OLS), the frame of mind to follow Nurudeen and Usman (2010), and Ogundipe and Aworinde (2011) in the analysis of the impact of government spending on infrastructure to economic growth in Nigeria. that line of thought offers a precise analysis of the relationship between government spending on transportation infrastructure and economic growth in Nigeria.
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The Shape of the Income Distribution and Economic Growth: Evidence from Swedish Labor Market Regions

The Shape of the Income Distribution and Economic Growth: Evidence from Swedish Labor Market Regions

As discussed in Section 4, two attractive features of the system GMM model is that it includes regional specific controls, but still exploits variation across regions, and that it explicitly ad- dresses endogeneity by using available lags as instrumental variables. However, the set-up re- lies on strong assumptions, not least regarding the validity of the instruments. We therefore avoid the potentially misleading convention in the literature, to rely on a test statistic from a single model specification (Forbes 2000, Panizza 2002, Benarjee and Duflo 2003, Voit- chovsky 2005), and extend the test procedure of their joint validity (explained below). As our point of departure, we use a panel with three year intervals 1994-2006. It leaves us with T=5 and enables us to make straightforward tests of the model by varying the set-up of the instru- mental variables. The number of explanatory variables is restricted to a minimum as they quickly increase the number of instruments and weaken the Hansen test of joint validity. Con- sequently, we only include the proportion with a college degree together with time specific ef- fects and the respective inequality measures. Below, we also present estimates based on four year intervals (T=4) in the same period 1994-2006. In our pooled regressions, both these pan- els resulted in strong statistical associations between the Q3/p9075 and growth (Table 3). This is useful from the perspective that employing GMM puts high demands on variation in the data.
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Climate Change Mitigation, Economic Growth and the Distribution of Income

Climate Change Mitigation, Economic Growth and the Distribution of Income

More specifically, the results presented here depend in part on the view that Australia is unlikely to experience large increases in unemployment over the forecast period. In that case, persons working in occupations adversely affected by the mitigation policy are deemed to be able to pick up jobs in other occupations. Hence there is little scope for employment changes to impact significantly on income inequality. Similarly, persons on low-incomes may spend a larger share of their budget on electricity, but the variation in budget shares across income groups is not generally large enough to drive substantial changes in inequality and, even then, its effect will be ameliorated by economic adjustment to the change in relative prices.
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Interaction Of Income Distribution, Taxes And Economic Growth

Interaction Of Income Distribution, Taxes And Economic Growth

While earlier models such as Harrod- Domar model predicted that greater inequality would lead to higher growth rate, there was, during 1990s a shift in focus towards the opposite effect: can greater inequality lead to a lower level of overall growth? Empirical evidence from both industrialized and less developed countries had tended to confirm the negative impact of inequality on growth. Historical and empirical evidence of various countries denotes that there are copies factors that affected inequality levels. Kaasa (2003) categorized these factors in five groups: Economic growth and development, demographic factors, political factors, historical, cultural and natural factors, and macro economic factors. Economists have long sought to understand the link between economic growth and income inequality. This arguments started by Kuznets (1955).
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Trade Liberalization, Economic Growth, and Income Distribution in a Multiple-cone Neoclassical Growth Model

Trade Liberalization, Economic Growth, and Income Distribution in a Multiple-cone Neoclassical Growth Model

liberalization would in rease growth only if it lowered the pri e of the investment good. This is for the following two reasons. First, Mazumdar (1996) onsidered an e onomy in whi h fa tor intensities were the same between two se tors, whereas this paper onsiders an e onomy in whi h fa tor intensities are different. Se ond, Mazumdar (1996) assumed that savings ome

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Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Indonesia

Regional Economic Integration and its Impacts on Growth, Poverty and Income Distribution: The Case of Indonesia

Indonesia is facing the trade liberalization and regional economic integration with several free trade areas, i.e. bilateral FTA, regional FTA and multilateral FTA. The aim of this paper is to analyze the impact of those international relationships on Indonesian economic growth, poverty and income distribution. By using a Global Computable General Equilibrium (GCGE) model, we made eighteen simulations to analyze the current and the potential international relationship that is faced by Indonesia. Generally, Indonesia gains significant benefit in terms of real GDP, output and welfare except FTA with India. FTA also increases the household income of rural group higher than the urban group ones. Unskilled labor experiences more advantages than skilled labor and poor household gain more benefit than the rich household both in rural and urban areas. Those conditions imply that FTA potentially could be a solution for national poverty reduction.
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A Positive Theory of the Income Redistributive Focus of Social Security

A Positive Theory of the Income Redistributive Focus of Social Security

security to function more effectively. Our results also suggest that the welfare effects of promoting total employment may be more important than improving the quality of employment (by encouraging the elderly to “free up” jobs for the young). The paper that is closest in spirit to our paper is Sala-i-Martin (1996). In his setup, the old are assumed to be less productive than the young. Moreover, since there are spillovers in the production technology resulting from the average level of labor productivity, the old lower the productivity of the young in the economy. Social security helps induce the old to pull out of the labor force, thereby raising the average level of labor productivity in the economy and promoting economic growth. In contrast, we abstract away from possible differences between young and old workers, except for their naturally different positions along the lifecycle and their labor market experiences. In particular, we consider that older workers who retain employment with the same firm will be more productive due to the accumulation of firm-specific human capital. Also, in our setting, gross output from a match with either a young or a newly employed old worker is the same. Interestingly, our mechanisms are sufficient to open a efficiency-enhancing role for social security.
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