Efficient Income Redistribution in a Growing Economy

Gerhard Sorger

CIRANO Working Papers from CIRANO

Abstract: We consider a neoclassical growth model in which the society consists of two classes (capitalists and workers). The capitalists consume part of their income and save the rest, whereas the workers are assumed to consume their entire income immediately without saving anything. The governement can redistribute income between the two classes by lump-sum transfers and taxation. We first state the result due to Kaital and Pohjola (1990), which characterizes the set of all first best solutions. We then show that the differential game between the capitalistic class and the government has a Markov-perfect Nash equilibrium which coincides with one of the first best solutions. This equilibrium features a long-run transfer of all wage income from the workers to the capitalists. On analyse un modèle néoclassique où la population se compose de deux classes (les capitalistes et les ouvriers). Les capitalistes consomment une portion de leur revenu et éprgnent le reste. Les ouvriers consomment tout leur revenu et n'épargnent rien. Le gouvernement peut redistribuer le revenu entre les deux classes au moyen des taxes et des transferts forfaitaires. D'abord on formule un résultat de Kaitala et Pohjola (1990) qui caractérise l'ensemble des solutions optimales de premier rang. Ensuite on démontre que dans le jeu différentiel entre la classe capitaliste et le gouvernement, il existe un équilibre Markov-parfait de Nash qui coïncide avec une solution optimale de premier rang. Cet équilibre implique des transferts à long terme du revenu de la classe ouvrière à la classe capitaliste.

Keywords: Income redistribution; Neoclassical growth model; Differential game; Markov perfect Nash equilibrium; Redistribution du revenu; modèle néoclassique de la croissance; jeu différentiel; équilibre Markov-parfait de Nash (search for similar items in EconPapers)
JEL-codes: H23 H24 (search for similar items in EconPapers)
Date: 1996-10-01
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:96s-29

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