Roads to equality: wealth distribution dynamics with public-private capital complementarity

Francisco Ferreira

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper proposes a model of wealth distribution dynamics with a capital market imperfection and a production function where public capital is complementary to private capital. A unique invariant steady-state distribution is derived, with three social classes: subsistence workers, 'government dependent' middle-class entrepreneurs and 'private infrastructure owning' upper-class entrepreneurs. It is shown that there is a minimum level of public investment below which the middle class disappears, and that increases in non-targeted public investment over some range lead to unambiguously less inequality of opportunity, as well as to greater output. This provides an additional rationale for an active role for the government in infrastructure, health and education provision, and has implications for foreign aid.

Keywords: Wealth distribution; capital market imperfections; inequality; public investment (search for similar items in EconPapers)
JEL-codes: D31 D63 E44 H54 O15 (search for similar items in EconPapers)
Pages: 42 pages
Date: 1995
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Citations: View citations in EconPapers (24)

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http://eprints.lse.ac.uk/19368/ Open access version. (application/pdf)

Related works:
Working Paper: Roads to Equality: Wealth Distribution Dynamics with Public-Private Capital Complementarity (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19368

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