Impact of Income Inequality on the Rate of Economic Growth: an Approach to Modelling
Abstract
A model of economic growth where subjective discount rates of consumers and the production function are formed endogenously is proposed. It is shown that the set of balanced growth equilibria is a continuum which can be parameterized by an index of inequality. Under some assumptions, the dependence of the balanced growth rate on this index has an inverted U-shaped form. Some empirical evidence supporting this form of dependence are provided.
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Economic Growth
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Articles of the St Petersburg University Journal of Economic Studies are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.