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Inequality and growth: Understanding the link through a simulation

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  • Hanlon, Michael

Abstract

As suggested in the literature, economic growth and inequality may be influenced by common determinants. One set of determinants may be stochastic production shocks, and in particular non-neutral shocks. To communicate this idea to undergraduate students, I present a model in which shocks to the capital stock introduce both growth and inequality. To engage students and reinforce the empirical consequences of this relationship, I employ an online simulation which implements the model. Representative simulation results are presented and discussed herein.

Suggested Citation

  • Hanlon, Michael, 2013. "Inequality and growth: Understanding the link through a simulation," International Review of Economics Education, Elsevier, vol. 13(C), pages 44-49.
    • Handle: RePEc:eee:ireced:v:13:y:2013:i:c:p:44-49
    DOI: 10.1016/j.iree.2013.04.015
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    Keywords

    Economic growth and inequality; Stochastic production shock; Non-neutral shock;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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