Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-22T21:19:20.310Z Has data issue: false hasContentIssue false
  • English
  • Français

GLOBAL POVERTY REDUCTION AND PARETO-IMPROVING REDISTRIBUTION

Published online by Cambridge University Press:  05 December 2011

Angus C. Chu
Angus C. Chu*
Affiliation:
Shanghai University of Finance and Economics and Institute of Economics, Academia Sinica
*
Address correspondence to: Angus C. Chu, School of Economics, Shanghai University of Finance and Economics, 777 Guoding Road, Shanghai 200433, China. E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

Can a transfer of wealth from the United States to the least developed countries be Pareto improving? We analyze this question in an open-economy R&D-based growth model, in which the high-income (low-income) country produces innovative (homogeneous) goods. We find that wealth redistribution to the low-income country simultaneously reduces global inequality and increases economic growth through an increase in labor supply in the high-income country. Given that the market equilibrium of R&D-based growth models is usually inefficient due to R&D externalities, the wealth redistribution may lead to a Pareto improvement, which occurs if the discount rate is sufficiently low or R&D productivity is sufficiently high.

Keywords

Economic GrowthR&DPareto-Improving Redistribution
Type
Articles
Information
Macroeconomic Dynamics , Volume 16 , Issue 4 , September 2012 , pp. 605 - 624
Copyright
Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Aghion, Philippe and Bolton, Patrick (1997) A theory of trickle-down growth and development. Review of Economic Studies 64, 151–172.CrossRefGoogle Scholar
Aghion, Philippe and Howitt, Peter (1992) A model of growth through creative destruction. Econometrica 60, 323–351.Google Scholar
Alesina, Alberto and Rodrik, Dani (1994) Redistributive politics and economic growth. Quarterly Journal of Economics 436, 465–490.Google Scholar
Barro, Robert (2000) Inequality growth in a panel of countries. Journal of Economic Growth 5, 5–32.CrossRefGoogle Scholar
Benarroch, Michael and Gaisford, James (2004) Foreign aid, innovation, and technology transfer in a North–South model with learning-by-doing. Review of Development Economics 8, 361–378.CrossRefGoogle Scholar
Bertola, Giuseppe (1993) Factor shares and savings in endogenous growth. American Economic Review 83, 1184–1198.Google Scholar
Bertola, Giuseppe, Foellimi, Reto, and Zweimuller, Josef (2006) Income Distribution in Macroeconomic Models. Princeton, NJ: Princeton University Press.Google Scholar
Bhagwati, Jagdish, Brecher, Richard, and Hatta, Tatsuo (1983) The generalized theory of transfers and welfare: Bilateral transfers in a multilateral world. American Economic Review 83, 606–618.Google Scholar
Boone, Peter (1996) Politics and the effectiveness of foreign aid. European Economic Review 40, 289–329.Google Scholar
Burnside, Craig and Dollar, David (2000) Aid, policies, and growth. American Economic Review 90, 847–867.CrossRefGoogle Scholar
Chatterjee, Santanu, Sakoulis, Georgios, and Turnovsky, Stephen (2003) Unilateral capital transfers, public investment, and economic growth. European Economic Review 47, 1077–1103.CrossRefGoogle Scholar
Chatterjee, Santanu and Turnovsky, Stephen (2007) Foreign aid and economic growth: The role of flexible labor supply. Journal of Development Economics 84, 507–533.Google Scholar
Chou, Chien-Fu and Talmain, Gabriel (1996) Redistribution and growth: Pareto improvements. Journal of Economic Growth 1, 505–523.Google Scholar
Cline, Edward (2008) Obama's global poverty act. Capitalism Magazine, April 3, 2008.Google Scholar
Cremers, Emily and Sen, Partha (2008) The transfer paradox in a one-sector overlapping generations model. Journal of Economic Dynamics and Control 32, 1995–2012.Google Scholar
Dinopoulos, Elias and Segerstrom, Paul (2010) Intellectual property rights, multinational firms and economic growth. Journal of Development Economics 92, 13–27.CrossRefGoogle Scholar
Easterly, William (2003) Can foreign aid buy growth? Journal of Economic Perspectives 17, 23–48.CrossRefGoogle Scholar
Easterly, William, Levine, Ross, and Roodman, David (2004) Aid, policies, and growth: Comment. American Economic Review 94, 774–780.CrossRefGoogle Scholar
Foellmi, Reto and Zweimuller, Josef (2006) Income distribution and demand-induced innovations. Review of Economic Studies 73, 941–960.Google Scholar
Galor, Oded and Moav, Omer (2004) From physical to human capital accumulation: Inequality and the process of development. Review of Economic Studies 71, 1001–1026.Google Scholar
Galor, Oded and Polemarchakis, Herakles (1987) Intertemporal equilibrium and the transfer paradox. Review of Economic Studies 54, 147–156.CrossRefGoogle Scholar
Galor, Oded and Zeira, Joseph (1993) Income distribution and macroeconomics. Review of Economic Studies 60, 33–52.CrossRefGoogle Scholar
Garcia-Penalosa, Cecilia and Turnovsky, Stephen (2006) Growth and income inequality: A canonical model. Economic Theory 28, 25–49.CrossRefGoogle Scholar
Garcia-Penalosa, Cecilia and Wen, Jean-Francois (2008) Redistribution and entrepreneurship with Schumpeterian growth. Journal of Economic Growth 13, 57–80.CrossRefGoogle Scholar
Griliches, Zvi (1992) The search for R&D spillovers. Scandinavian Journal of Economics 94, 29–47.Google Scholar
Grossman, Gene and Helpman, Elhanan (1991a) Endogenous product cycles. Economic Journal 101, 1214–1229.Google Scholar
Grossman, Gene and Helpman, Elhanan (1991b) Quality ladders in the theory of growth. Review of Economic Studies 58, 43–61.Google Scholar
Grossman, Gene and Lai, Edwin (2004) International protection of intellectual property. American Economic Review 94, 1635–1653.Google Scholar
Jones, Charles (1999) Growth: With or without scale effects. American Economic Review 89, 139–144.CrossRefGoogle Scholar
Jones, Charles and Williams, John (1998) Measuring the social return to R&D. Quarterly Journal of Economics 113, 1119–1135.Google Scholar
Jones, Charles and Williams, John (2000) Too much of a good thing? The economics of investment in R&D. Journal of Economic Growth 5, 65–85.Google Scholar
Li, Chol-Won (1998) Inequality and Growth: A Schumpeterian Perspective. Working paper 9609, University of Glasgow.Google Scholar
Li, Chol-Won (2001) On the policy implications of endogenous technological progress. Economic Journal 111, C164–C179.CrossRefGoogle Scholar
Persson, Torsten and Tabellini, Guido (1994) Is inequality harmful for growth? American Economic Review 84, 600–621.Google Scholar
Sachs, Jeffrey (2005) The End of Poverty: Economic Possibilities for Our Time. New York: Penguin Books.Google Scholar
Samuelson, Paul (1947) Foundation of Economic Analysis. Cambridge, MA: Harvard University Press.Google Scholar
Schlafly, Phyllis (2008) Obama's 0.7% solution for poverty gets pass from Senate Republicans. Investor's Business Daily, February 28, 2008.Google Scholar
Segerstrom, Paul, Anant, T.C.A., and Dinopoulos, Elias (1990) A Schumpeterian model of the product life cycle. American Economic Review 80, 1077–1092.Google Scholar
Shimomura, Koji (2007) A Pareto-improving foreign aid in a dynamic North–South model. In Beladi, Hamid and Choi, E. Kwan (eds.), Frontiers of Economics and Globalization, pp. 131–153. Bingley, UK: Emerald Group Publishing Limited.Google Scholar
Turunen-Red, Arja and Woodland, Alan (1988) On the multilateral transfer problem: Existence of Pareto improving international transfers. Journal of International Economics 25, 249–269.Google Scholar
Zweimuller, Josef (2000) Schumpeterian entrepreneurs meet Engel's law: The impact of inequality on innovation-driven growth. Journal of Economic Growth 5, 185–206.Google Scholar