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Inequality and economic growth in the UK

Yang, Xiaoliang, Minford, Patrick and Meenagh, David 2020. Inequality and economic growth in the UK. Open Economies Review
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Abstract

This paper analyses the effect of wealth inequality on UK economic growth in recent decades with a heterogeneous-agent growth model where agents can enhance individual productivity growth by undertaking entrepreneurship. The model assumes wealthy people are more able to afford the costs of entrepreneurship. Wealth concentration therefore stimulates entrepreneurship among the rich and so aggregate growth, whose fruits in turn are largely captured by the rich. This process creates a mechanism by which inequality and growth are correlated. The model is estimated and tested by Indirect Inference and is not rejected. Policy-makers face a trade-off between redistribution and growth.

Item Type: Article
Status: In Press
Schools: Business (Including Economics)
Publisher: Springer Verlag
ISSN: 0923-7992
Date of First Compliant Deposit: 9 July 2020
Date of Acceptance: 9 July 2020
Last Modified: 09 Jul 2020 13:15
URI: http://orca.cf.ac.uk/id/eprint/133253

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