European Parliament Library

Lucas vs. Lucas :, On Inequality and Growth

Lucas (2004) asserts that "Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution... The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production." In this paper we evaluate this claim using an extended version of Lucas' (1987) welfare-evaluation framework. Surprisingly, we find that the welfare costs of inequality outweigh the benefits of growth in most cases. These calculations support the case for a research agenda that treats not only growth but also inequality as a priority
Table Of Contents
Contents; I. Introduction; II. Welfare Analysis; A. The Model; Distribution of consumption; Individual and social welfare; Standard welfare measures; Alternative welfare measures; Welfare measures in terms of growth rates; Welfare gains from growth in terms of inequality; Net welfare consequences of growth and inequality; The shadow price of inequality; B. Calibration; C. Results; III. Optimal Inequality; A. The Planner's Problem; B. Optimal Choices; C. Calibration; D. Results; IV. Final Comments; Figures; 1. Log of Average World Per Capita Consumption, 1960-2000
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (41 p.)
Specific Material Designation
Form Of Item

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