THE DYNAMIC COST AND PERSISTENCE OF ASSET INEQUALITY IN AN AGRARIAN ECONOMY

Michael R. Carter and Frederic Zimmerman

No 12644, Staff Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics

Abstract: A growing literature suggests that inequality is economically costly. However, much of this literature depends on static analyses, begging the question of why a market system doesn't redress inequality over time if it is efficient to do so. We develop a dynamic model of asset accumulation and endogenous asset-price formation in an agrarian economy with multiple market imperfections. The model is parameterized to pre-revolutionary Nicaragua and solved numerically. The results suggest that although a free land market would eventually lead to an egalitarian land distribution, the process would take long enough, and involve sufficiently great factor-use inefficiencies along the way, that a redistributive policy would improve on the market's performance in both equity and efficiency criteria.

Keywords: Agribusiness (search for similar items in EconPapers)
Pages: 40
Date: 1998
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:wisagr:12644

DOI: 10.22004/ag.econ.12644

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