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A Model of Trickle Down Through Learning

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  • K Blackburn
  • N Bose

Abstract

This paper presents an analysis of income distribution based on an overlapping generations model of imperfect capital markets, technological non-convexities and information acquisition. Heterogeneous, altruistic agents apply for loans from financial intermediaries to undertake risky investment projects. Borrowing is prohibited below a critical level of wealth that depends on agents' evaluation of risk which is updated over time according to the arrival of new information. This process of learning governs the transition of lineage wealth and, with it, the dynamics of income distribution. In general, limiting outcomes depend on initial conditions that determine the extent to which class divisions persist in multiple steady state equilibria. Such divisions may vanish if the the initial distribution satisfies certain criteria.

Suggested Citation

  • K Blackburn & N Bose, 2001. "A Model of Trickle Down Through Learning," Centre for Growth and Business Cycle Research Discussion Paper Series 06, Economics, The University of Manchester.
    • Handle: RePEc:man:cgbcrp:06
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    3. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2007. "Distribution and development in a model of misgovernance," European Economic Review, Elsevier, vol. 51(6), pages 1534-1563, August.
    4. K Blackburn & D Varvarigos, 2005. "Growth, Uncertainty and Finance," Centre for Growth and Business Cycle Research Discussion Paper Series 48, Economics, The University of Manchester.
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    6. Soyolmaa Batbekh & Keith Blackburn, 2008. "On the Macroeconomics of Microfinance," Centre for Growth and Business Cycle Research Discussion Paper Series 106, Economics, The University of Manchester.
    7. Kritsada Patluang, 2018. "Contemporary Frontier Transformation for Inclusive Growth: The Dual Role of "Smart" Competitiveness Factors," GATR Journals jber159, Global Academy of Training and Research (GATR) Enterprise.

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