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Dev2 (Subject) / Chapter 3 (Lesson)
Chapter 3
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- 1.) 2 Models where inequality might have a causal effect on growth 1.) Savings and Inequality // Technology, Capital markets and Inequality (Imperfect capital markets with high inequality: ppl might not have the ability to invest in profitable technology)
- 1.) Model: Savings and Inequality is about the question... 2.) Model relies on the idea that marginal savings rate depends on... 3.) S-shaped relationship between ... and .... 4.) Steps of s-shaped curve 1.) How does inequality/equality affect savings rate in a society? 2.)level of personal income 3.) income (x-achses)//household 4.) Subsistence Concerns: at low y people have low s // Aspirations: middle classes, who have aspirations for upward mobility have high marginal savings rate // Very rich: low marginal savings rates
- 1.) When do savings go up in the Savings and Inequality model? 2.)Large rich , small middle class, large poor: what happens with redistribution from rich to middle class ? 3.) When do justitification of aspirations story not exist? 1.) If one redistributes money from the rich who have a low marginal savings rate to those who are saving more out of an extra dollar 2.) It increases savings and thus p.c. income (Solow) 3.) When a society is perfectly equal! Ppl will not aspire to become upper class because there is no upper class
- 1.) Inequality and Development: Evidence (Persson and Tabellini 1994): Why is inequality bad? 2.) Methodology and results. 3.) Results of whole chapter 1.) It leads to demands for redistributive policies which can be growth hampering. 2.) Divide growth histories of nine countries into 38 spells. Growth (dependent) neg.corrl with share of income of richest 20% (no s.g.) , ratio of GDP p.c. to highest value in sample - negative sg. Index of education pos. but not sg. 3.)There is scope for persisten poverty traps with non-convex production and missing credit markets. Some empirical support inequality and low growth correlated (but not clear whether causation)
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