By Giuseppe Bertola
This booklet seems on the distribution of source of revenue and wealth and the results that this has at the macroeconomy, and vice versa. Is a extra equivalent distribution of source of revenue helpful or destructive for macroeconomic development, and the way does the distribution of wealth evolve in a marketplace financial system? Taking inventory of effects and strategies built within the context of the Nineteen Nineties revival of progress thought, the authors specialise in capital accumulation and long-run development. They convey how rigorous, optimization-based technical instruments might be utilized, past the representative-agent framework of study, to account for life like industry imperfections and for political-economic interactions. The remedy is thorough, but available to scholars and nonspecialist economists, and it deals expert readers a wide-ranging and leading edge therapy of an more and more vital learn box. The booklet follows a unmarried analytical thread via a chain of other progress versions, permitting readers to understand their constitution and an important assumptions. this is often rather valuable at a time while the literature on source of revenue distribution and progress has built speedy and in different varied instructions, turning into tricky to assessment.
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Additional info for Income Distribution in Macroeconomic Models
1, both ﬁrm-level and aggregate production functions are deﬁned net of capital depreciation. This has no implications for this argument: if the gross production function is concave and has constant returns to scale, so does net production as long as, as is commonly assumed, a ﬁxed portion of capital in use depreciates within each period. June 17, 2005 14:48 12 • m13-book Sheet number 32 Page number 12 black Chapter 1 We also note that, if the non-accumulated factor is immobile and technologies are homogeneous, the distribution of production is determined by the distribution of l.
Clearly, the functional form of the aggregate production function F(·, ·) does reﬂect the heterogeneity of technologies, and the size distribution of ﬁrms will mirror the technological differences: ﬁrms with a better production technology will produce at a larger scale. In cases where no misunderstandings are possible, we will not explicitly index ﬁrms in what follows. 1 Returns to Scale When all individual production functions have constant returns to scale, so does the aggregate production function.
The ad hoc consumption functions considered earlier usefully highlight some important mechanic interactions between distribution and macroeconomic growth. It produces clear predictions about the dynamics of the distribution of wealth. Hence the assumption that savings choices depend only on current income and wealth levels makes the analysis particularly simple and provides a useful benchmark. Of course, as emphasized by Modigliani and Brumberg (1954) and Friedman (1957) and subsequent literature, that simple assumption is theoretically unsatisfactory if savings are motivated by a desire to smooth consumption over time: then, rational savings choices should be based on households’ permanent (rather than current) income levels.