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The Dynamics of Exploitation and Inequality in Economies with Heterogeneous Agents

Giorgos Galanis, Roberto Veneziani and Naoki Yoshihara ()

No 679, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper analyses the relation between growth, inequalities, and exploitation as the unequal exchange of labour (UE exploitation). An economy with heterogeneous, intertemporally optimising agents is considered which generalises John Roemer's [52, 53] seminal models. First, a correspondence between prots and the existence (and intensity) of UE exploitation is proved in the dynamic context. This result is important, positively, because the prot rate is one of the key determinants of investment decisions, and, normatively, because it provides a link between UE exploitation and the functional distribution of income. Second, it is shown that asset inequalities are fundamental for the emergence of UE exploitation, but they are not sucient for its persistence, both in equilibria with accumulation and growth, and, perhaps more surprisingly, in stationary intertemporal equilibrium paths. Labour-saving technical progress, however, may yield sustained growth with persistent UE exploitation by keeping labour abundant relative to capital. Persistent inequalities in income and labour exchanged arise from the interaction between labour market conditions and dierential ownership of productive assets.

Keywords: Dynamics; accumulation; exploitation; inequalities (search for similar items in EconPapers)
JEL-codes: D51 D63 C61 E11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hme and nep-mac
Date: 2018-10
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Working Paper: The dynamics of exploitation and inequality in economies with heterogeneous agents (2018) Downloads
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