Inequality and growth: Understanding the link through a simulation

Michael Hanlon

International Review of Economics Education, 2013, vol. 13, issue C, 44-49

Abstract: As suggested in the literature, economic growth and inequality may be influenced by common determinants. One set of determinants may be stochastic production shocks, and in particular non-neutral shocks. To communicate this idea to undergraduate students, I present a model in which shocks to the capital stock introduce both growth and inequality. To engage students and reinforce the empirical consequences of this relationship, I employ an online simulation which implements the model. Representative simulation results are presented and discussed herein.

Keywords: Economic growth and inequality; Stochastic production shock; Non-neutral shock (search for similar items in EconPapers)
JEL-codes: C63 D63 O40 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ireced:v:13:y:2013:i:c:p:44-49

DOI: 10.1016/j.iree.2013.04.015

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