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The Impact of an Unequal Distribution of Income on Economic Growth: Theoretical Considerations

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Secular Stagnation Theories

Part of the book series: Springer Studies in the History of Economic Thought ((SSHET))

Abstract

This chapter focuses on the possible transmission channels through which an unequal distribution of income may impact economic growth. It turns out that the effects are heterogeneous, making it difficult to determine a priori the precise impact of changes in the distribution of income on economic growth. While it is distinguished between demand-side, supply-side, and socio-political mechanisms, this clear-cut distinction can become blurred, especially when real capital investment is involved.

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Notes

  1. 1.

    Although Okun (1975) literally addressed the trade-off between equality and efficiency, with the latter being defined as “[...] getting the most out of a given input [...]” (Okun 1975, p. 2), he himself occasionally seemed to have economic output or economic growth in mind (Okun 1975, p. 48). Similarly, in the literature relating to Okun (1975), the term efficiency is often used synonymously with economic growth and/or economic output. See, for instance, Atkinson (2015, p. 243).

  2. 2.

    Yet, the impact of economic growth on the distribution of income is addressed in the modified Steindlian model presented in Chap. 8.

  3. 3.

    Hansen (1941, p. 381) later argued along similar lines.

  4. 4.

    The quote from Keynes ([1919] 1911, p. 13) obviously contains a typographical error and, as in Keynes ([1919] 1920, p. 19), should read: “[...] [T]he principle of accumulation based on inequality was a vital part of the pre-war order [...]” (emphasis added).

  5. 5.

    The G.I. Bill, a US government program which, among other things, financially supported the education of veterans after World War II, serves as a suitable example of the stimulating economic impact of widespread investment in human capital. In fact, the G.I. Bill is reported to have been an important element in the strong post-war economic growth in the United States. As outlined by Humes (2006, p. 197), “[...] spending for the program was paid back many times over in the form of increased tax revenues, income, consumer spending, and productivity [...].” See also Gordon (2016, p. 606).

  6. 6.

    The original edition of Gilder’s Wealth and Poverty was published in January 1981, only a couple of days before the inauguration of US President Ronald Reagan, a proponent of supply-side economics.

  7. 7.

    On early contributions on the median voter theorem, see also Black (1948) and Downs (1957a, b).

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  1. University of Hohenheim, Stuttgart, Baden-Württemberg, Germany

    Christina Anselmann

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Correspondence to Christina Anselmann .

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Anselmann, C. (2020). The Impact of an Unequal Distribution of Income on Economic Growth: Theoretical Considerations. In: Secular Stagnation Theories. Springer Studies in the History of Economic Thought. Springer, Cham. https://doi.org/10.1007/978-3-030-41087-2_6

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