A model of inequality and growth for the postwar US economy

Yue, Lei 2024. A model of inequality and growth for the postwar US economy. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

This thesis puts forward a model of endogenous growth in which entrepreneurial innovation by household-owned firms depends on their wealth and the extent to which their efforts are taxed and regulated. Firms are heterogeneous by wealth and the model implies that wealthier firms will innovate more than others, even if facing the same marginal tax rates and regulative constraints. I have estimated the model on post-war US data by indirect inference and found a parameter set that matches the auxiliary model data behaviour without being rejected at the 2% level. The model when repeatedly hit by the shocks identified in the estimated equations implies that growth and inequality will tend to rise steadily over time. It is to be expected that this will prompt political demands for redistributive transfers. I have examined how a rising transfer system of taxes and tax credits would impact on inequality and growth. I find that it would reduce inequality and raise the welfare of the average household but at a substantial cost in growth, and a rising cost in the rate of long-term growth. The model therefore suggests a strong reason, given the checks and balances in its Constitution designed to reinforce states’ powers, why US governments have built only quite limited redistribution into their tax system.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics)
Date of First Compliant Deposit:	17 January 2025
Date of Acceptance:	17 January 2025
Last Modified:	23 Jan 2025 14:37
URI:	https://orca.cardiff.ac.uk/id/eprint/175357

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