Basu, P. and Bandyopadhyay, D. (2005) 'What drives the cross-country growth and inequality correlation ?', Canadian journal of economics = Revue canadienne d'économique., 38 (4). pp. 1272-1297.
We present a neo-classical model that explores the determinants of growth-inequality correlation and attempts to reconcile the seemingly conflicting evidence on the nature of the growth-inequality relationship. The initial distribution of human capital determines the long-run income distribution and the growth rate by influencing the occupational choice of the agents. The steady-state proportion of adults that innovates and updates human capital is path dependent. The output elasticity of skilled-labour, barriers to knowledge spillovers, and the degree of redistribution determine the range of steady-state equilibria. From a calibration experiment we report that a skill-intensive technology, low barriers to knowledge spillovers, and high degrees of redistribution characterize the industrial countries with a positive growth-inequality correlation. A negative correlation between growth and inequality arises for the group of non-industrial countries with the opposite characteristics.
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|Publisher Web site:||http://dx.doi.org/10.1111/j.0008-4085.2005.00325.x|
|Record Created:||03 Apr 2007|
|Last Modified:||03 Mar 2010 15:32|
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