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Roads to equality: wealth distribution dynamics with public-private capital complementarity

Ferreira, Francisco H. G. (1995) Roads to equality: wealth distribution dynamics with public-private capital complementarity. TE, 286. Suntory and Toyota International Centres for Economics and Related Disciplines, London School of Economics and Political Science, London, UK.

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Abstract

This paper proposes a model of wealth distribution dynamics with a capital market imperfection and a production function where public capital is complementary to private capital. A unique invariant steady-state distribution is derived, with three social classes: subsistence workers, 'government dependent' middle-class entrepreneurs and 'private infrastructure owning' upper-class entrepreneurs. It is shown that there is a minimum level of public investment below which the middle class disappears, and that increases in non-targeted public investment over some range lead to unambiguously less inequality of opportunity, as well as to greater output. This provides an additional rationale for an active role for the government in infrastructure, health and education provision, and has implications for foreign aid.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 1995 Francisco H. G. Ferreira
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
Journal of Economic Literature Classification System: H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures; Other Public Investment and Capital Stock
D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources; Human Development; Income Distribution; Migration
Sets: Collections > Economists Online
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 286
Date Deposited: 14 Jul 2008 11:19
URL: http://eprints.lse.ac.uk/19368/

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