Distribution and Policy in the New Growth Literature a

Abstract: This paper examines how economic activity and the distribution of income are related in endogenous growth models. I examine the different implications of models where inequality is due to differences in capital and labour endowments and of those with different types of labour. I argue that the new growth literature has done more than simply allow us to formalize old ideas: it emphasizes that growth and distribution are jointly determined, and thus allows us to explore the distributional implications of growth-enhancing policies. In contrast to the neoclassical framework, the new literature implies that there in not necessarily a tradeoff between redistribution and growth