Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/230423 
Year of Publication: 
2018
Series/Report no.: 
Cardiff Economics Working Papers No. E2018/17
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
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.
Subjects: 
Heterogeneous-agent Model
Entrepreneurship
Aggregate Growth
Wealth Inequality
Redistribution
Indirect Inferencee
JEL: 
E10
C63
O30
O40
Document Type: 
Working Paper

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