Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324391 
Year of Publication: 
2025
Series/Report no.: 
Cardiff Economics Working Papers No. E2025/7
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
This paper examines the long-term relationship between economic growth and inequality in the UK using an endogenous growth model with heterogeneous agents. The model links entrepreneurial incentives to individual wealth, showing how wealth distribution endogenously influences growth. Estimation via Indirect Inference confirms its ability to replicate UK data from 1870 to 2016. The findings reveal a trade-off between wealth equalization and growth, with welfare analysis showing that optimal policies depend on priorities: higher income transfers benefit lowerincome groups but reduce growth, while lower transfers support growth with modest welfare costs
Subjects: 
Growth
inequality
heterogeneous-agent
entrepreneurship
JEL: 
E2
E6
H2
O4
Document Type: 
Working Paper

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