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Income Inequality and Growth: Calibration and Simulation for the Kenyan Economy

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  • Mbara, Gilbert

Abstract

We investigate the notable decline in wealth and income inequality in Kenya over the 10-year period between 2005 and 2015. Using a calibrated continuous time heterogeneous agent model, we attribute up to 92% of the variation in top wealth inequality to a persistent but slow increase in the return to capital, a low risk free rate, and rising effective income tax rates. Our study suggests that a macroeconomic environment characterized by low risk-free interest rates anchored by low debt-to fiscal revenue ratios are key to reducing both wealth and income inequality.

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  • Mbara, Gilbert, 2024. "Income Inequality and Growth: Calibration and Simulation for the Kenyan Economy," Working Papers aeeab0f8-4a1f-430c-90d1-5, African Economic Research Consortium.
    • Handle: RePEc:aer:wpaper:aeeab0f8-4a1f-430c-90d1-58a06c9a0b2f
    Note: African Economic Research Consortium
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