Economic Growth, Income Distribution, and Macroeconomic Policies

Chong Ook Rhee
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Chong Ook Rhee: Seoul Woman's University

Korean Economic Review, 1990, vol. 6, issue 1, 43-62

Abstract: In one-sector growth model economic growth through technical progress can distort the income distribution in the short and medium run, but may converge to the stability of functional shares in income distribution without technical progress before reaching stationary state in the long run. In the presence of capital accumulation induced from technical progress this paper provides theoretical reasons to explain Kravis'(1959) empirical finding that the notion of long-run constancy in relative shares is false. Public policies are required to correct the relationship between maximizing economic growth following technical progress and the resulting distortion of functional income distribution. To achieve the two objectives in a trade-off altogether, this paper comes up with a package of policy: investment incentive for growth, the decrease of saving level, and the increase of labor's ownership on induced capital accumulation.

Date: 1990
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