EconPapers    
Economics at your fingertips  
 

Viability of an economy with constrained inequality

Jacek Krawczyk () and Wilbur Townsend

No 4689, Working Paper Series from Victoria University of Wellington, School of Economics and Finance

Abstract: Governments want to prevent high inequality while maintaining economic effi ciency. This paper investigates how an economy can satisfy both these constraints. We use the relative factor share as a proxy for inequality and so can use a representative agent model to understand how inequality evolves. Our representative agent model includes capital, consumption and debt which, like the relative factor share, are influenced by tax rates. Whether the model's evolutions can be constrained is understood as a problem of viability theory, and so we compute the viability kernels corresponding to our constraints. These kernels explain both how policy makers should act and why they act as they currently do. For example, we show that substantial government debt will require policy makers to reduce inequality. More importantly, we demonstrate that viability theory is a meaningful, interesting approach to understanding the tradeoff between inequality and efficiency.

Keywords: Factor income; Inequality; Viability theory (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ger
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://researcharchive.vuw.ac.nz/handle/10063/4689

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vuw:vuwecf:4689

Access Statistics for this paper

More papers in Working Paper Series from Victoria University of Wellington, School of Economics and Finance Alice Fong, Administrator, School of Economics and Finance, Victoria Business School, Victoria University of Wellington, PO Box 600 Wellington, New Zealand. Contact information at EDIRC.
Bibliographic data for series maintained by Library Technology Services ().

 
Page updated 2019-05-09
Handle: RePEc:vuw:vuwecf:4689