Mitigating the trade-off between equality and dynamic efficiency

Clas Eriksson
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Clas Eriksson: Department of Economics, Uppsala University, Sweden

Finnish Economic Papers, 1993, vol. 6, issue 2, 89-95

Abstract: In a model where decisions on income distribution and investment are separated beltween two classes (workers and capitalists), Lancaster (1973) showed that dynamic inefficiency will occur. The reason is that investors do not internalise the external effects of investment. In two kinds of growth models, this paper proposes income distribution rules that reduce or eliminate these problems, by separating the considerations on efficiency and income distribution from each other.

JEL-codes: D33 O41 (search for similar items in EconPapers)
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:fep:journl:v:6:y:1993:i:2:p:89-95

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