 Redistribution, inequality, and efficiency with credit constraints: Implications for South AfricaYoseph Getachew and Stephen J Turnovsky Economic Modelling, 2020, vol. 93, issue C, 259-277 Abstract: We develop a model that jointly determines the distribution of income and the aggregate macrodynamics. We identify multiple channels through which alternative public policies such as transfers, consumption and income taxes, and public investment will affect the inequality-efficiency trade-off. Income tax and transfers have both a direct income and an indirect substitution effect; a consumption tax has only the latter. We present extensive numerical simulations motivated by the South African National Development Plan 2030, the objective of which is to reduce soaring inequality and increase per capita GDP. Our results illustrate how the judicious combination of social grants and a consumption tax may help achieve these targets. The simulations also suggest that the sharp decline in the private-public capital ratio, coupled with a high degree of complementarity between public and private capital may help explain the persistence of market inequality in South Africa during the last two decades. Keywords: Redistribution policies; Incomplete capital market; Idiosyncratic shocks; Efficiency; Inequality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:93:y:2020:i:c:p:259-277 DOI: 10.1016/j.econmod.2020.08.008 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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