Lucas vs. Lucas : On Inequality and Growth

Author/Editor:

Juan Carlos Cordoba ; Genevieve Verdier

Publication Date:

January 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 07/17

Subject:

English

Publication Date:

January 1, 2007

ISBN/ISSN:

9781451865813/1018-5941

Stock No:

WPIEA2007017

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

39

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