Income inequality and economic growth with altruistic bequests and human capital investment

McDonald, Stuart and Zhang, Jie (2012) Income inequality and economic growth with altruistic bequests and human capital investment. Macroeconomic Dynamics, 16 Supplement s3: 331-354. doi:10.1017/S136510051000101X


Author McDonald, Stuart
Zhang, Jie
Title Income inequality and economic growth with altruistic bequests and human capital investment
Journal name Macroeconomic Dynamics   Check publisher's open access policy
ISSN 1365-1005
1469-8056
Publication date 2012-11
Year available 2011
Sub-type Article (original research)
DOI 10.1017/S136510051000101X
Volume 16
Issue Supplement s3
Start page 331
End page 354
Total pages 24
Place of publication Cambridge, United Kingdom
Publisher Cambridge University Press
Collection year 2013
Language eng
Abstract In this paper we explore how income inequality affects growth in a dynastic family model with bequests (physical capital) and investment in human capital for children. For tractability, we abstract from factor markets and focus on household production, which is prevalent in developing countries. We explore a joint distribution of bequests and human capital and track the evolution of income distribution across generations. We show that initial inequality has a positive indirect effect on average output growth by lowering the ratio of physical to human capital, besides its standard negative direct effect. If education is mainly privately (publicly) provided, then income inequality retards (promotes) growth outside the balanced growth path. On the balanced growth path, inequality always hinders growth.
Keyword Income inequality
Human capital
Bequests
Growth
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ
Additional Notes Published online: 14 December 2011.

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2013 Collection
School of Economics Publications
 
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Created: Mon, 26 Nov 2012, 16:12:07 EST by Dr Stuart Mcdonald on behalf of School of Economics