Global poverty reduction and Pareto-improving redistribution

Angus Chu

MPRA Paper from University Library of Munich, Germany

Abstract: Can a transfer of wealth from the US to least developed countries be Pareto improving? We analyze this question in an open-economy innovation-driven growth model, in which the high-income (low-income) country produces innovative (homogenous) goods. We find that wealth redistribution to the low-income country simultaneously reduces global inequality and stimulates innovation through an increase in labor supply in the high-income country. Given that the market equilibrium of R&D-growth models is usually inefficient due to R&D externalities, the wealth redistribution may lead to a Pareto improvement, which occurs if the discount rate is sufficiently low or R&D productivity is sufficiently high.

Keywords: innovation-driven growth; wealth redistribution; Pareto improvement (search for similar items in EconPapers)
JEL-codes: F43 O31 O41 (search for similar items in EconPapers)
Date: 2009-08
New Economics Papers: this item is included in nep-dge and nep-mic
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https://mpra.ub.uni-muenchen.de/16809/1/MPRA_paper_16809.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/18803/1/MPRA_paper_18803.pdf revised version (application/pdf)

Related works:
Journal Article: GLOBAL POVERTY REDUCTION AND PARETO-IMPROVING REDISTRIBUTION (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16809

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