Journal Article
Zero Growth and Long-Run Inequality
Abstract: Using a basic model to study both wealth and income inequality and their relations to long-run economic growth may lead to questionable conclusions. We consider a more complex model that includes realistic variation in the levels of income and wealth across households in addition to a new ingredient, luck in each household?s labor productivity. Using this model,we determine that existing estimates of the elasticity of substitution between capital and labor are generally far away from the region where inequality would explode if long-run growth were zero.
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https://doi.org/10.26509/frbc-ec-201511
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Economic Commentary
Publication Date: 2015
Issue: September
Order Number: 11