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INEQUALITY, GROWTH, AND OVERTAKING

Published online by Cambridge University Press:  13 June 2006

YOSHIAKI SUGIMOTO
YOSHIAKI SUGIMOTO
Affiliation:
Osaka University
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Abstract

This research develops a theory about the role of within-country income inequality in the emergence of overtaking in economic performance among 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. Because of the initial dominance of the positive effect of inequality, a less egalitarian economy follows a higher growth path in the short run, with a lower growth path in the long run. It also is shown that divergence or convergence may arise instead of overtaking, depending on the initial levels of development and inequality.

Keywords

Income DistributionOvertakingDivergenceConvergence

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Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 10 , Issue 5 , November 2006 , pp. 625 - 651
Copyright
© 2006 Cambridge University Press

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