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Income Distribution in Macroeconomic Models - Giuseppe Bertola

Income Distribution in Macroeconomic Models

Hardcover Published: 25th December 2005
ISBN: 9780691121710
Number Of Pages: 456

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This book looks at the distribution of income and wealth and the effects that this has on the macroeconomy, and vice versa. Is a more equal distribution of income beneficial or harmful for macroeconomic growth, and how does the distribution of wealth evolve in a market economy? Taking stock of results and methods developed in the context of the 1990s revival of growth theory, the authors focus on capital accumulation and long-run growth. They show how rigorous, optimization-based technical tools can be applied, beyond the representative-agent framework of analysis, to account for realistic market imperfections and for political-economic interactions.

The treatment is thorough, yet accessible to students and nonspecialist economists, and it offers specialist readers a wide-ranging and innovative treatment of an increasingly important research field. The book follows a single analytical thread through a series of different growth models, allowing readers to appreciate their structure and crucial assumptions. This is particularly useful at a time when the literature on income distribution and growth has developed quickly and in several different directions, becoming difficult to overview.

"The interaction between the dynamics of economic growth and the evolution of economic inequality is an important and challenging problem. Recent advances in macroeconomics of heterogeneous agents have finally made it possible to investigate this question in a systematic manner. This timely book offers an excellent first broad overview in this area. The ideas in the book are so intuitive that they can be taught to advanced undergraduates. The exposition is so clear, simple and yet rigorous that the book is useful in a first-year graduate macro sequence. Its comprehensive coverage makes it an indispensable source of reference for the researcher in the field. A great achievement! I wish I had written this book."--Kiminori Matsuyama, Northwestern University
"Income distribution questions are becoming increasingly important in modern macroeconomic theory, and they will probably become even more so as computational techniques are utilized to move macroeconomics beyond the representative agent paradigm. This book does a good job in summarizing the current state of the literature in an interesting and hands-on way."--Alex Michaelides, London School of Economics
"A well balanced, clearly argued, up-to-date, and informative account of the subject. The arguments that spin off from this book will interest not only macroeconomists but also others in the field."--Frank Cowell, Professor of Economics and Director of Distributional Analysis Research Programme, London School of Economics; author of The Economics of Poverty and Inequality

Introductionp. ix
Aggregate Growth and Individual Savingsp. 1
Production and Distribution of Income in a Market Economyp. 3
Accountingp. 4
The Neoclassical Theory of Distributionp. 8
Exogenous Savings Propensitiesp. 14
A Linear Consumption Functionp. 16
References and Further Issuesp. 25
Optimal Savingsp. 28
The Optimal Consumption Pathp. 29
The Dynamics of Accumulation and Distributionp. 36
Welfare Distribution in Complete Marketsp. 41
References and Further Issuesp. 46
Appendix: HARA Preferencesp. 47
Review Exercisesp. 48
Factor Income Distributionp. 51
Factor Shares and Savings in Early Growth Modelsp. 53
Factor Shares in the Neoclassical Growth Modelp. 57
Optimal Savings and Sustained Growthp. 63
Policy and Political Economyp. 70
References and Further Issuesp. 77
Appendix: Factor Shares in a Two-Sector Growth Modelp. 81
Savings and Distribution with Finite Horizonsp. 88
Distribution and Growth in the Two-Period OLG Modelp. 90
Inequality in a Perpetual Youth Modelp. 104
One-Period Lifetimes and Bequestsp. 115
References and Further Issuesp. 122
Appendix: Consumption in the Perpetual Youth Modelp. 124
Factor Shares and Taxation in the OLG Modelp. 127
Factor Shares in the Two-Period Modelp. 128
Factor Shares and Growth in the Perpetual Youth Modelp. 138
References and Further Issuesp. 143
Financial Market Imperfectionsp. 145
Investment Opportunities and the Allocation of Savingsp. 147
Decreasing Returns to Individual Investmentp. 148
Increasing Returns and Indivisibilitiesp. 158
Endogenous Factor Prices and "Trickle-Down" Growthp. 165
References and Further Issuesp. 172
Review Exercisesp. 177
Risk and Financial Marketsp. 180
Optimization under Uncertaintyp. 181
Rate-of-Return Riskp. 189
Portfolio Choice and Risk Poolingp. 195
References and Further Issuesp. 200
Review Exercisep. 202
Uninsurable Income Shocksp. 204
A Two-Period Characterizationp. 205
General Equilibrium: The CARA Casep. 210
General Equilibrium: The CRRA Casep. 214
Application: Uninsurable Risk in the Labor Marketsp. 226
References and Further Issuesp. 235
Many Goodsp. 239
Distribution and Market Powerp. 241
Growth through Expanding Product Varietyp. 243
Variable Elasticities of Substitutionp. 252
Factor Shares, Taxation, and Political Economyp. 262
References and Further Issuesp. 264
Indivisible Goods and the Composition of Demandp. 266
Income Distribution and Product Diversityp. 268
The Introduction of New Productsp. 275
Inequality and Vertical Product Differentiationp. 285
References and Further Issuesp. 298
Hierarchic Preferencesp. 302
A Basic Frameworkp. 303
Growth, Distribution, and Structural Changep. 313
References and Further Issuesp. 319
Dynamic Interactions of Demand and Supplyp. 321
Learning by Doing and Trickle-Downp. 322
Demand Composition and Factor Rewardsp. 328
References and Further Issuesp. 337
Solutions to Exercisesp. 339
Referencesp. 399
Indexp. 419
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780691121710
ISBN-10: 0691121710
Audience: Tertiary; University or College
Format: Hardcover
Language: English
Number Of Pages: 456
Published: 25th December 2005
Publisher: Princeton University Press
Country of Publication: US
Dimensions (cm): 23.5 x 15.2  x 3.18
Weight (kg): 0.79

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