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Title: Income inequality and economic growth with altruistic bequests and human capital investment
Authors: McDonald, S.
Zhang, J. 
Keywords: Bequests
Human Capital
Income Inequality
Issue Date: Nov-2012
Citation: McDonald, S., Zhang, J. (2012-11). Income inequality and economic growth with altruistic bequests and human capital investment. Macroeconomic Dynamics 16 (SUPPL. 3) : 331-354. ScholarBank@NUS Repository.
Abstract: In this paper we explore how income inequality affects growth in a dynastic family model with bequests (physical capital) and investment in human capital for children. For tractability, we abstract from factor markets and focus on household production, which is prevalent in developing countries. We explore a joint distribution of bequests and human capital and track the evolution of income distribution across generations. We show that initial inequality has a positive indirect effect on average output growth by lowering the ratio of physical to human capital, besides its standard negative direct effect. If education is mainly privately (publicly) provided, then income inequality retards (promotes) growth outside the balanced growth path. On the balanced growth path, inequality always hinders growth. Copyright © 2011 Cambridge University Press.
Source Title: Macroeconomic Dynamics
ISSN: 13651005
DOI: 10.1017/S136510051000101X
Appears in Collections:Staff Publications

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