Lucas vs. Lucas: On Inequality and Growth
Juan Cordoba () and
Genevieve Verdier ()
Macroeconomics from University Library of Munich, Germany
Lucas (2004) asserts that 'Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion, the most poisonous, is to focus on questions of distribution...The potential for improving the lives of poor people by finding different ways of distributing current production is nothing [Italics in the original] compared to the apparently limitless potential of increasing production.' In this article we evaluate this claim using an extended version of Lucas' (1987) welfare evaluation framework. We construct a social welfare function following Lucas' (2004) own suggestion of weighing everyone's welfare equally, and compute welfare measures in the same way as Lucas (1987). The result is surprising and robust. The potential welfare gains of redistribution are substantial and likely exceed the welfare gains of economic growth. Moreover, our calculations suggest that US inequality is above its optimal level.
Keywords: Welfare costs; business cycles; economic growth; inequality (search for similar items in EconPapers)
JEL-codes: D3 E1 E2 (search for similar items in EconPapers)
Pages: 41 pages
New Economics Papers: this item is included in nep-dev, nep-dge, nep-hpe and nep-mac
Note: Type of Document - pdf; pages: 41
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed
Downloads: (external link)
Working Paper: Lucas vs. Lucas: On Inequality and Growth (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0511021
Access Statistics for this paper
More papers in Macroeconomics from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ().