Growth and Redistribution: The Hedging Perspective

Larry Samuelson and Jakub Steiner

American Economic Review: Insights, 2025, vol. 7, issue 2, 250-67

Abstract: We investigate the impact of wealth redistribution on economic growth, building on Kelly's (1956) optimal investment portfolio theory. A growth-optimal policy redistributes wealth from "lucky" overperforming individuals to underperforming ones, minimizing the systematic component of this redistribution in a myopic fashion. That is, the optimal policy minimizes the discrepancy between endowments and outcomes, counterfactually taking outcomes as independent of endowments. The myopia in this result follows from a decoupling argument that allows us to model the planner as independently choosing a growth-maximizing policy and a pattern of wealth circulation.

JEL-codes: D31 E23 G41 G51 H23 O41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/aeri.20240456

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