Public Capital and Income Distribution: a Marriage of Hicks & Newman-Read

Getachew, Yoseph Yilma (2008). Public Capital and Income Distribution: a Marriage of Hicks & Newman-Read. UNU-MERIT.

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UNU-MERIT Working Papers

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  • Author Getachew, Yoseph Yilma
    Title Public Capital and Income Distribution: a Marriage of Hicks & Newman-Read
    Publication Date 2008
    Publisher UNU-MERIT
    Abstract This paper examines how publicly provided inputs could affect income distribution. By applying the Newman-Read production function- a generalized Cobb-Douglas production function- to Hicks's idea of the determinant of factor share, such usually complex dynamics remain analytically tractable. The paper shows that whether public capital has an effect on income distribution dynamics depends on its elasticity of substitution to private capital. If the elasticity of substitution of public capital to private capital is greater than unity, then an investment in public capital increases its relative income share and, hence, decreases the private capital share. In such a case, public capital would have a positive impact on income distribution dynamics.
    Keyword Income distribution
    Public capital
    Economic growth
    JEL D31
    H54
    O41
    Copyright Holder UNU-MERIT
    Copyright Year 2008
    ISSN 1871-9872
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    Created: Wed, 11 Dec 2013, 16:23:59 JST