Profit Sharing, Income Inequality and Capital Accumulation

Mahmoud Nabi

MPRA Paper from University Library of Munich, Germany

Abstract: The relationship between economic development and income inequality is not neutral vis-à-vis the role of the financial system in responding to the needs of different categories of agents. Indeed, as shown by the literature of the persistent inequality (e.g. Banarjee and Newman, 1993; Piketty, 1997), taking in account the asymmetric impact of the financial imperfections on wealthy and poor agents changes the pace of the Kuznets (1955) relationship between economic development and income inequality. In this paper we try to analyze the effect of introducing profit-sharing financial contract between banks and entrepreneurs on the evolution of the capital accumulation/income inequality relationship. It is interestingly shown that income inequality disappears when the economy reaches a second stage of development.

Keywords: Financial imperfection; profit sharing; inequality; capital accumulation (search for similar items in EconPapers)
JEL-codes: D63 O16 (search for similar items in EconPapers)
Date: 2012-04
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Profit Sharing, Income Inequality and Capital Accumulation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:49830

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