Roads to Equality: Wealth Distribution Dynamics with Public-Private Capital Complementarity

Francisco Ferreira

STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: This paper proposes a model of wealth distribution dynamics with a capital market imperfection and a production function where public capital is complementary to private capital. A unique invariant steady-state distribution is derived, with three social classes: subsistence workers, 'government dependent' middle-class entrepreneurs and 'private infrastructure owning' upper-class entrepreneurs. It is shown that there is a minimum level of public investment below which the middle class disappears, and that increases in non-targeted public investment over some range lead to unambiguously less inequality of opportunity, as well as to greater output. This provides an additional rationale for an active role for the government in infrastructure, health and education provision, and has implications for foreign aid.

Keywords: Wealth distribution; capital market imperfections; inequality; public investment. (search for similar items in EconPapers)
Date: 1995-04
References: Add references at CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
https://sticerd.lse.ac.uk/dps/te/te286.pdf (application/pdf)

Related works:
Working Paper: Roads to equality: wealth distribution dynamics with public-private capital complementarity (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:stitep:286

Access Statistics for this paper

More papers in STICERD - Theoretical Economics Paper Series from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE
Bibliographic data for series maintained by ().