Income distribution management to sustain long-term economic growth: does the equalization of income distribution contribute to long-term economic growth?

Shungo Sakaki

Evolutionary and Institutional Economics Review, 2017, vol. 14, issue 2, No 4, 363-395

Abstract: Abstract I investigate income distribution management to sustain long-term economic growth. In this paper, I will use a simulation model in which the three dynamics undertake control or inducement with each other. It is a system for inter-system control that takes control or inducement over a virtual social system composed of the replicator dynamics. The simulation results in this paper indicate the following two points: First, the remarkable process of a unidirectional shift—from a society where the income is highly concentrated to a society where the income is evenly distributed, and vice versa—was not observed. As far as the model structure in this paper is concerned, income distribution is independent from long-term economic growth. Second, the management of the income distribution ratio enables the promotion of the growth driven by the replacement of the existing technology with new knowledge stock. In a society where the income is evenly distributed, consumer demand promotes growth by increasing the evenness in the growth phase, while in the sluggish phase, the temporary concentration of the income enables the creation of a new growth course by inducing technological change brought about by the investment demand. In countries where the income is not highly concentrated, most of which operate on the basis of a market economy, the consumer demand-driven economic policy is effective. On the other hand, in a society where the income is highly concentrated, the investment demand promotes growth by increasing the concentration in the growth phase, while in the sluggish phase, a temporary equalization of the distribution enables the creation of a new growth course by inducing a technological change brought about by consumer demand.

Keywords: Income distribution; Long-term economic growth; Replicator dynamics; Inter-system control; C63; D30; O33 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s40844-017-0079-0

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