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Growth and distribution in an AK-model with endogenous impatience

Kirill Borissov () and Stéphane Lambrecht ()

No 2007044, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper combines two strands of the literature on inequality and distribution issues: the classical approach, which insists on the division of society into classes characterized by different saving propensities, and the social conflict approach, which considers that inequality inflicts direct and indirect costs to economic development. An endogenous-growth model is studied. We assume that each consumer's subjective discount factor is determined endogenously and depends on economic inequality through the following two channels. On the one hand, it is positively related to the individual consumer's relative wealth. On the other hand, it is negatively affected by a simple aggregate measure of social conflict. We show that, unlike models with exogenously given discount rates, steady state equilibria in our model is indeterminate and that the set of all equilibria is acontinuum which can be parameterized by a simple index of income inequality. The growth rate is ambiguously related to the inequality index. However, under some reasonable assumptions, the growth rate dependence on this index has an inverted U-shaped form.

Keywords: wealth distribution; intertemporal choice; growth; development (search for similar items in EconPapers)
JEL-codes: D31 D90 O10 (search for similar items in EconPapers)
Date: 2007-07-01
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Related works:
Journal Article: Growth and distribution in an AK-model with endogenous impatience (2009) Downloads
Working Paper: Growth and distribution in an AK-model with endogenous impatience (2009) Downloads
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