Growth-Distribution Trade-offs: The Role of Capacity Utilisation

Hamid Mohtadi ()

Cambridge Journal of Economics, 1988, vol. 12, issue 4, 419-33

Abstract: Previous empirical studies of the impact of economic growth on income distribution have consistently found statistically insignificant impact. This paper empirically reexamines this impact for a cross section of thirty-nine (advanced and developing) countries, focusing on a new critical factor, i.e., the presence or absence of economic slack. With this factor included, growth becomes significantly unequalizing in a "capital taut" economy, while the presence of slack capacity plays a significantly equalizing role. This suggests that the insignificant finding of previous studies stems from an "averaging out" of these two opposite impacts when this factor is omitted. Copyright 1988 by Oxford University Press.

Date: 1988
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