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Lucas vs. Lucas :, On Inequality and Growth

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
international or intergovernmental publication
Literary Form
non fiction
Main title
Lucas vs. Lucas :
Nature of contents
Series statement
IMF Working Papers
Sub title
On Inequality and Growth
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, 1960-20002. Standard Deviation of Log of Average World Per Capita Consumption, 1960-20003. Social Indifference Curves; 4. Optimal Inequality and Growth; Tables; 1. Parameter Values; 2. Welfare Measures-Standard Formulation; 3. Welfare Measures-Alternative Formulation; 4. Welfare Measures-Growth and Inequality Equivalents; 5. Optimal Inequality, Growth, and Consumption Levels; References
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