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Wealth inequality, entrepreneurship and industrialization

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  • Sahana Roy Chowdhury

Abstract

The paper shows that in a two-good economy with a basic and a luxury good sector inequality is indeed a hindrance to provide sufficient incentive for entrepreneurship to low-wealth economic agents. In contrast to the literature it uses both demand and supply-side explanations for the analysis. An entrepreneurial subsidy policy to encourage entrepreneurship in autarky financed by a lump sum tax on the rich is not very effective in unequal economies since it hardly impacts the welfare. When trade is opened up in the luxury good sector of such an economy the sector might cease to exist. In such a scenario, the rich people being the sole consumers would reap the entire benefits of globalization via low price of the imported luxury good. The paper highlights that the crucial question is: ‘how to globalize’ rather than ‘whether to globalize’ and suggests policy measures to make globalization inclusive. Copyright Springer-Verlag 2013

Suggested Citation

  • Sahana Roy Chowdhury, 2013. "Wealth inequality, entrepreneurship and industrialization," Journal of Economics, Springer, vol. 108(1), pages 81-102, January.
    • Handle: RePEc:kap:jeczfn:v:108:y:2013:i:1:p:81-102
    DOI: 10.1007/s00712-012-0268-6
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    References listed on IDEAS

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    More about this item

    Keywords

    Inequality; Entrepreneurship; Industrialization; Trade; Welfare; D31; D60; D63; H30; J24;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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