Skip to main content

Advertisement

SpringerLink
Log in

Growth and distribution in an AK-model with endogenous impatience

  • Research Article
  • Published:
Economic Theory Aims and scope Submit manuscript

Abstract

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 in models with 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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Aghion P. and Bolton P. (1997). A theory of trickle-down growth and development. Rev Econ Stud 64: 151–172

    Article  Google Scholar 

  • Alesina A. and Perotti R. (1996). Income distribution, political instability and investment. Eur Econ Rev 40: 1203–1228

    Article  Google Scholar 

  • Alesina A. and Rodrik A. (1994). Distributive politics and economic growth. Q J Econ 109: 465–490

    Article  Google Scholar 

  • Barro R. (2000). Inequality and growth in a panel of countries. J Econ Growth 5: 5–32

    Article  Google Scholar 

  • 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

    Article  Google Scholar 

  • Benhabib J. and Przeworski A. (2006). The political economy of redistribution under democracy. Econ Theory 29: 271–290

    Article  Google Scholar 

  • Bertola G. (1993). Factor shares and savings in endogenous growth. Am Econ Rev 83: 1184–1198

    Google Scholar 

  • Bhattacharya J. (1998). Credit market imperfections, income distribution and capital accumulation. Econ Theory 11: 171–200

    Article  Google Scholar 

  • Blanchard O.J. and Fischer S. (1989). Lectures on Macroeconomics. MIT, Cambridge

    Google Scholar 

  • Bleaney M. and Nishiyama A. (2004). Income inequality and growth—does the relationship vary with the income level?. Econ Lett 84: 349–355

    Article  Google Scholar 

  • Borissov K. (2002). Indeterminate steady-state equilibria in a one-sector model. Econ Lett 77: 125–130

    Article  Google Scholar 

  • Borissov, K.: Aggregate Models of Economic Growth and Distribution (in Russian). St Petersburg Institute for Economics and Mathematics (2005)

  • 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)

  • Bourguignon F. (1981). Pareto superiority of unegalitarian equilibria in Stiglitz’ model of wealth distribution with convex saving function. Econometrica 49: 1469–1475

    Article  Google Scholar 

  • 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)

  • Carrol Ch., Overland J. and Weil D. (2000). Saving and growth with habit formation. Am Econ Rev 90: 341–355

    Article  Google Scholar 

  • Chen B.-L. (2003). An inverted-U relationship between inequality and long-run growth. Econ Lett 78: 205–212

    Article  Google Scholar 

  • Chen, B.-L.: Multiple BGPs in a growth model with habit persistence. J Money Credit banking (2006), forthcoming

  • Cole H.L., Mailath G.J. and Postlewaite A. (1992). Social norms, saving behavior, and growth. J Polit Econ 100: 1092–1125

    Article  Google Scholar 

  • Corneo G. and Jeanne O. (2001). Status, the distribution of wealth and growth. Scand J Econ 103: 283–293

    Article  Google Scholar 

  • Cowell F.A. (1995). Measuring Inequality, 2nd edn. Harvester Wheatsheaf, Hemel Hempstead

    Google Scholar 

  • Galor O. and Zeira J. (1993). Income distribution and macroeconomics. Rev Econ Stud 60: 35–52

    Article  Google Scholar 

  • Galor O. and Moav O. (2004). From physical to human capital accumulation: inequality and the process of development. Rev Econ Stud 71: 1001–1026

    Article  Google Scholar 

  • García-Peñalosa C. and Turnovsky S.J. (2006). Growth and income inequality: a canonical model. Econ Theory 28: 25–49

    Article  Google Scholar 

  • 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)

  • Fershtman C., Murphy K.M. and Weiss Y. (1996). Social status, education and growth. J Polit Econ 106: 108–132

    Article  Google Scholar 

  • Forbes K. (2000). A reassessment of the relationship between inequality and growth. Am Econ Rev 90: 869–887

    Article  Google Scholar 

  • Frankel M. (1962). The production function in allocation and growth: a synthesis. Am Econ Rev 52: 995–1022

    Google Scholar 

  • 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

    Article  Google Scholar 

  • Kaldor N. (1956). Alternative theories of distribution. Rev Econ Stud 23: 94–100

    Google Scholar 

  • Kaldor N. (1957). A model of economic growth. Econ J 67: 591–624

    Article  Google Scholar 

  • Keynes J.M. (1920). The Economic Consequences of the Peace. Macmillan, New York

    Google Scholar 

  • 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

    Google Scholar 

  • Lambrecht St., Michel Ph. and Vidal J.-P. (2005). Public pensions and growth. Euro Econ Rev 49: 1261–1281

    Article  Google Scholar 

  • Lawrence E.C. (1991). Poverty and the rate of time preference: evidence from panel data. J Polit Econ 99: 54–75

    Article  Google Scholar 

  • Lewis W.A. (1954). Economic development with unlimited supply of labor. Manchester Sch 22: 139–191

    Article  Google Scholar 

  • Li H. and Zou H. (1998). Income inequality is not harm for growth: theory and evidence. Rev Develop Econ 2: 318–334

    Article  Google Scholar 

  • Mankiw N.G. (2000). The savers-spenders theory of fiscal policy. Am Econ Rev 90: 120–125

    Article  Google Scholar 

  • 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

    Article  Google Scholar 

  • Partridge M. (1997). Is inequality harmful for growth: comment. Am Econ Rev 87: 1019–1032

    Google Scholar 

  • Pasinetti L. (1962). Rate of profit and income distribution in relation to the rate of economic growth. Rev Econ Stud 29: 103–120

    Google Scholar 

  • Perotti R. (1996). Growth, income distribution and democracy: what the data say. J Econ Growth 1: 149–187

    Article  Google Scholar 

  • Persson T. and Tabellini G. (1994). Is inequality harmful for growth? Theory and evidence. Am Econ Rev 84: 600–621

    Google Scholar 

  • Romer P.M. (1986). Increasing returns and long-run growth. J Polit Econ 94: 1002–1037

    Article  Google Scholar 

  • Ryder E. and Heal G. (1973). Optimal growth with intertemporally dependent preferences. Rev Econ Stud 40: 1–33

    Article  Google Scholar 

  • Samwick A.A. (1998). Discount rate homogeneity and social security reform. J Develop Econ 57: 117–146

    Article  Google Scholar 

  • Schlicht E. (1975). A neoclassical theory of wealth distribution. Jahrb Natl Okon Stat 189: 78–96

    Google Scholar 

  • Shen L. (2007). When will a dictator be good?. Econ Theory 31: 343–366

    Article  Google Scholar 

  • Shi S. and Epstein L. (1993). Habits and time preference. Int Econ Rev 34: 61–84

    Article  Google Scholar 

  • Smetters K. (1999). Ricardian equivalence: long-run Leviathan. J Public Econ 73: 395–421

    Article  Google Scholar 

  • Smith A. (1776). The wealth of nations. The Modern Library, New York

    Google Scholar 

  • Sorger G. (2000). Income and wealth distribution in a simple model of growth. Econ Theory 16: 23–42

    Article  Google Scholar 

  • 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

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. European University in St Petersburg, 3 Gagarinskaya Str., St Petersburg, 191187, Russia

    Kirill Borissov

  2. St Petersburg Institute for Economics and Mathematics (Russian Academy of Sciences), 1 Tchaikovsky Str., St Petersburg, 191187, Russia

    Kirill Borissov

  3. Laboratoire EQUIPPE – Universités de Lille, Faculté des Sciences Economiques et Sociales, Université des Sciences et Technologies de Lille (USTL, Lille 1), Cité scientifique, bât. SH2, 59655, Villeneuve d’Ascq cedex, France

    Stéphane Lambrecht

  4. CORE, Université catholique de Louvain, voie du roman pays, 34, 1348, Louvain-la-Neuve, Belgium

    Stéphane Lambrecht

Authors
  1. Kirill Borissov
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Stéphane Lambrecht
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Stéphane Lambrecht.

Additional information

The authors are grateful to an anonymous referee for helping them improve the paper. They also thank Raouf Boucekkine for his comments and suggestions. The authors also benefited from discussions with Nathalie Chusseau and Joël Héllier. This research is the outcome of a collaboration initiated during the project Development of Advanced Teaching in Economics (DATE) of the European University in Saint-Petersburg, funded by the Higher Education Support Programme (HESP) of the Open Society Institute (OSI). It also was supported by the project Inégalités et Qualifications dans l’espace européen (Laboratoire EQUIPPE-Universités de Lille) of the programme Politiques publiques et intégration européenne (IFRESI-CNRS). The usual disclaimers apply.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Borissov, K., Lambrecht, S. Growth and distribution in an AK-model with endogenous impatience. Econ Theory 39, 93–112 (2009). https://doi.org/10.1007/s00199-007-0307-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00199-007-0307-7

Keywords

JEL Classification

Search

Navigation