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Inequality and Economic Growth: The Perspective of the New Growth Theories

Aghion, Philippe; Caroli, Eve; Garcia-Peñalosa, Cecilia (1999), Inequality and Economic Growth: The Perspective of the New Growth Theories, The Journal of Economic Literature, 37, 4, p. 1615-1660

Type
Article accepté pour publication ou publié
Date
1999
Journal name
The Journal of Economic Literature
Volume
37
Number
4
Publisher
American Economic Association
Pages
1615-1660
Metadata
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Author(s)
Aghion, Philippe

Caroli, Eve

Garcia-Peñalosa, Cecilia
Abstract (EN)
We analyze the relationship between inequality and economic growth from two directions. The first part of the survey examines the effect of inequality on growth, showing that when capital markets are imperfect, there is not necessarily a trade-off between equity and efficiency. It therefore provides an explanation for two recent empirical findings, namely, the negative impact of inequality and the positive effect of redistribution upon growth. The second part analyzes several mechanisms whereby growth may increase wage inequality, both across and within education cohorts. Technical change, and in particular the implementation of "General Purpose Technologies," stands as a crucial factor in explaining the recent upsurge in wage inequality.
Subjects / Keywords
Economic Growth; Redistribution; Growth
JEL
J31 - Wage Level and Structure; Wage Differentials
O15 - Human Resources; Human Development; Income Distribution; Migration
O41 - One, Two, and Multisector Growth Models
O11 - Macroeconomic Analyses of Economic Development