Is There a 'Double Bonus' from Reducing Inequality?
Economic Inquiry, Vol. 50, Issue 2, pp. 551-562, 2012
We study the effect of inequality on growth in an overlapping generations (OLG) model where inequality affects growth through accumulation of human capital and endogenous fertility. In contrast to much of the existing literature, we argue that the effect of inequality on growth might be non‐monotonic. Our model suggests that the effect depends on the demographic stage of development: inequality impedes growth in low‐fertility (high human capital) economies, but enhances growth in high‐fertility (low human capital) economies. Our finding casts doubt on a “double bonus” from reducing inequality in developing countries which are typically characterized by high fertility.
Number of Pages in PDF File: 12
JEL Classification: O40, J13, O15Accepted Paper Series
Date posted: April 19, 2012
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