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Mitigating the trade-off between equality and dynamic efficiency

Author

Listed:
  • Clas Eriksson

    (Department of Economics, Uppsala University, Sweden)

Abstract

In a model where decisions on income distribution and investment are separated beltween two classes (workers and capitalists), Lancaster (1973) showed that dynamic inefficiency will occur. The reason is that investors do not internalise the external effects of investment. In two kinds of growth models, this paper proposes income distribution rules that reduce or eliminate these problems, by separating the considerations on efficiency and income distribution from each other.

Suggested Citation

  • Clas Eriksson, 1993. "Mitigating the trade-off between equality and dynamic efficiency," Finnish Economic Papers, Finnish Economic Association, vol. 6(2), pages 89-95, Autumn.
    • Handle: RePEc:fep:journl:v:6:y:1993:i:2:p:89-95
    as

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    References listed on IDEAS

    as
    1. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    2. repec:bla:scandj:v:95:y:1993:i:4:p:559-79 is not listed on IDEAS
    3. Weitzman, Martin L, 1983. "Some Macroeconomic Implications of Alternative Compensation Systems," Economic Journal, Royal Economic Society, vol. 93(372), pages 763-783, December.
    4. Lancaster, Kelvin, 1973. "The Dynamic Inefficiency of Capitalism," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1092-1109, Sept.-Oct.
    5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

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