Book contents
- Prospects for Economic Growth in the United States
- Prospects for Economic Growth in the United States
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Notes on Contributors
- Foreword
- Preface
- Acknowledgments
- Part I Overview
- Part II Labor and Economic Growth
- Part III Implications of Technology for Growth
- Part IV The Effects of Fiscal Policy on Growth
- Part V Special Topics on Economic Growth
- 9 Banking on Prosperity
- 10 Economic Growth and Income Inequality: Insights from the Representative Consumer Theory of Distribution
- Part VI A Concluding Perspective
- Index
- References
10 - Economic Growth and Income Inequality: Insights from the Representative Consumer Theory of Distribution
from Part V - Special Topics on Economic Growth
Published online by Cambridge University Press: 21 October 2021
- Prospects for Economic Growth in the United States
- Prospects for Economic Growth in the United States
- Copyright page
- Dedication
- Contents
- Figures
- Tables
- Notes on Contributors
- Foreword
- Preface
- Acknowledgments
- Part I Overview
- Part II Labor and Economic Growth
- Part III Implications of Technology for Growth
- Part IV The Effects of Fiscal Policy on Growth
- Part V Special Topics on Economic Growth
- 9 Banking on Prosperity
- 10 Economic Growth and Income Inequality: Insights from the Representative Consumer Theory of Distribution
- Part VI A Concluding Perspective
- Index
- References
Summary
This chapter discusses the representative consumer theory of distribution (RCTD), highlighting the insights it offers into the growth–inequality relationship. It begins by embedding the RCTD in a basic Ramsey growth model, which presents its equilibrium structure in the most transparent manner. It then extends the analysis to include: (i) fiscal instruments; (ii) distribution of abilities across agents; (iii) a progressive tax structure; (iv) accumulation of human capital; and (v) public investment. The tradeoffs between inequality and other aggregates, both concurrent and over time, are stressed. RCTD introduces path dependence into the evolution of wealth and income inequality. Finally, while the tractability of RCTD makes it appealing and may provide many useful insights, it is based on strong assumptions adopted in much of contemporary macrodynamics. To understand the nature of the growth–inequality relationship, one needs to embed it within a consistently specified general equilibrium growth model, recognizing that different frameworks offer different perspectives and may lead to different conclusions.
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- Prospects for Economic Growth in the United States , pp. 263 - 318Publisher: Cambridge University PressPrint publication year: 2021
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