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FACTOR INCOME DISTRIBUTION AND ENDOGENOUS ECONOMIC GROWTH: PIKETTY MEETS ROMER
Author(s) -
Irmen Andreas,
Tabakovic Amer
Publication year - 2020
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12850
Subject(s) - romer , economics , endogenous growth theory , capital (architecture) , income distribution , distribution (mathematics) , labour economics , neoclassical economics , keynesian economics , inequality , human capital , market economy , mathematical analysis , cartography , mathematics , archaeology , history , geography
What is the relationship between the economy's long‐run growth rate, its capital‐income ratio, and its factor income distribution? A satisfactory answer requires an endogenous growth and savings rate. We scrutinize Piketty's (2014) theory in a richly parameterized variant of Romer's (1990) seminal model with and without population growth. The economy's growth and savings rate are exogenous in Piketty's theory and endogenous in Romer's. In contrast to Piketty's Second Fundamental Law of Capitalism a smaller growth rate may be associated with a smaller capital‐income ratio. Moreover, it may go together with a greater or a smaller capital share. ( JEL E10,E21,E25,O33,O41)