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An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes


Falkinger, Josef (1994). An Engelian model of growth and innovation with hierarchic consumer demand and unequal incomes. Ricerche Economiche, 48(2):123-139.

Abstract

The paper develops an endogenous growth model which is based on lexicographical consumer preferences. The central variable determining the long-run rate of growth is personal income distribution. Its role in the process of growth depends crucially on the assumption about productivity growth. If productivity grows proportionally to product diversity, then an unequal distribution of incomes, measured by the rate of proportion of top to average incomes, has a positive effect on growth. However, under alternative assumptions, for instance, if productivity is a function of average income, inequality turns out to be harmful for economic growth.

Abstract

The paper develops an endogenous growth model which is based on lexicographical consumer preferences. The central variable determining the long-run rate of growth is personal income distribution. Its role in the process of growth depends crucially on the assumption about productivity growth. If productivity grows proportionally to product diversity, then an unequal distribution of incomes, measured by the rate of proportion of top to average incomes, has a positive effect on growth. However, under alternative assumptions, for instance, if productivity is a function of average income, inequality turns out to be harmful for economic growth.

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Additional indexing

Item Type:Journal Article, not refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Date:June 1994
Deposited On:09 Oct 2013 07:22
Last Modified:07 Dec 2017 22:49
Publisher:Elsevier
ISSN:0035-5054
Publisher DOI:https://doi.org/10.1016/0035-5054(94)90003-5

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