Skip to main content
×
Home
    • Aa
    • Aa

GROWTH AND INEQUALITY: MODEL EVALUATION BASED ON AN ESTIMATION-CALIBRATION STRATEGY

  • Hyeok Jeong (a1) and Robert M. Townsend (a2)
Abstract

This paper evaluates two well-known models of growth with inequality that have explicit micro underpinnings related to household choice. With incomplete markets or transactions costs, wealth can constrain investment in business and the choice of occupation and also constrain the timing of entry into the formal financial sector. Using the Thai Socio-Economic Survey (SES), we estimate the distribution of wealth and the key parameters that best fit cross-sectional data on household choices and wealth. We then simulate the model economies for two decades at the estimated initial wealth distribution and analyze whether the model economies at those micro-fit parameter estimates can explain the observed macro and sectoral aspects of income growth and inequality change. Both models capture important features of Thai reality. Anomalies and comparisons across the two distinct models yield specific suggestions for improved research on the micro foundations of growth and inequality.

Copyright
Corresponding author
Address correspondence to: Hyeok Jeong, Department of Economics, University of Southern California, 3620 S. Vermont Ave., Kaprielian Hall Room 300, Los Angeles, CA 90089, USA; e-mail: hjeong@usc.edu.
References
Hide All
Aghion Philippe and Bolton Patrick (1997) A theory of trickle-down growth and development. Review of Economic Studies 5 (64), 151172.
Banerjee Abhijit and Duflo Esther (2000) Inequality and Growth: What Can the Data Say? NBER Working Paper 7793.
Banerjee Abhijit and Newman Andrew F. (1993) Occupational choice and the process of development. Journal of Political Economy 5 (101), 274298.
Bourguignon François (2002) The Distributional Effects of Growth: Case Studies vs. Cross-country Regression. DELTA Working Paper 2002–23.
Browning Martin, Hansen Lars P., and Heckman James J. (1999) Micro data and general equilibrium models. In Taylor John B. and Woodford Michael (eds.), Handbook of macroeconomics, Vol. 1A. Amsterdam: North Holland.
Deininger K. and Squire L. (1996) A new data set measuring income inequality. World Bank Economic Review 5 (10), 565591.
Frisch Ragnar (1933) Editorial. Econometrica 5 (1), 14.
Gine Xavier and Townsend Robert M. (2004) Evaluation of financial liberalization: A general equilibrium model with constrained occupational choice. Journal of Development Economics 74, 269307.
Granger Clive W.J. (1999) Empirical modeling in economics: Specification and evaluation. Cambridge: Cambridge University Press.
Greenwood Jeremy and Jovanovic Boyan (1990) Financial development, growth, and the distribution of income. Journal of Political Economy 5 (98), 10761107.
Hansen Lars P. and Heckman James J. (1996) The empirical foundations of calibration. Journal of Economic Perspectives 5 (10), 87104.
Jeong Hyeok (2000) Sources of Kuznets Dynamics in Thailand. Ph.D. dissertation. University of Chicago.
Jeong Hyeok (in press) Assessment of relationship between growth and inequality: Micro evidence from thailand. Macroeconomic Dynamics.
Jeong Hyeok and Kim Yong (2006) Complementarity and Transition to Modern Economic Growth. IEPR Working Paper Series 06.44.
Jeong Hyeok and Townsend Robert M. (2007) Sources of TFP growth: Occupational choice and financial deepening. Economic Theory 32 (1), 179221.
Kuznets Simon (1955) Economic growth and income inequality. American Economic Review, Papers and Proceedings 5 (45), 128.
Kydland F.E. and Prescott Edward. C. (1982) Time to build and aggregate fluctuations. Econometrica 5 (50), 13451370.
Kydland F.E. and Prescott Edward. C. (1996) The computational experiment: An econometric tool. Journal of Economic Perspectives 5 (10), 6985.
Lloyd-Ellis Hew and Bernhardt Dan (2000) Enterprise, inequality, and economic development. Review of Economic Studies 5 (67), 147168.
Mookherjee Dilip and Shorrocks Anthony F. (1982) A decomposition analysis of the trend in UK income inequality. Economic Journal 5 (92), 886902.
Oreskes Naomi, Shrader-Frechette Kristin, and Belitz Kenneth (1994) Verification, validation, and confirmation of numerical models in the earth sciences. Science 5 (263), 641646.
Smirnov N. (1948) Table for estimating the goodness of fit of empirical distributions. Annals of Mathematical Statistics 5 (19/2), 279281.
Townsend Robert M. (1978) Intermediation with costly bilateral exchange. Review of Economic Studies 5 (45), 417425.
Townsend Robert M. and Ueda Kenichi (2006) Transitional growth with increasing inequality and financial deepening. Review of Economic Studies 73 (1), 251293.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Macroeconomic Dynamics
  • ISSN: 1365-1005
  • EISSN: 1469-8056
  • URL: /core/journals/macroeconomic-dynamics
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords:

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 51 *
Loading metrics...

Abstract views

Total abstract views: 270 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 21st October 2017. This data will be updated every 24 hours.