Inequality, Growth, and Overtaking
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This research develops a theory about the role of inequality in the overtaking of growth performance across countries. The theory captures two opposing effects of inequality on factor accumulation and suggests that the qualitative change in their combined effect is a prime cause of overtaking. Due to the initial dominance of the positive effect of inequality, a less egalitarian economy undergoes a higher growth path in the short run, followed by a lower growth path in the long run. It is also shown that divergence or convergence may arise instead of overtaking, depending on the initial levels of development and inequality.
Keywords: Wealth Distribution; Overtaking; Divergence; Convergence (search for similar items in EconPapers)
JEL-codes: J31 O11 O15 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-ltv
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpda:0304001
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