- Economic growth is, ultimately, the result of the myriad of transactions which take place in a market economy. Similarly, the distribution of income depends on who has ownership of factors of production, how much they can sell them for, and whether the resultant income is redistributed or not. It would be surprising were economic growth and income distribution not to be linked. But how exactly they might be linked has been the topic of many competing theories and empirical evaluations. Unfortunately, the studies have not led to a convergence on a common view that there is, or is not, a trade-off between the two goals of an equitable society and a rich one.
- This lack of enlightenment becomes less surprising once the empirical studies are examined in detail. Many empirical studies have looked at the final distribution of income, when some of the theories make stronger predictions about the links between growth and the distribution of income before taxes and transfers; similar ...
