Policies Shifting Income Distribution Could Trigger Regime Change in Economic Growth
The article explores how policies affecting income distribution between capitalists and workers can impact long-term economic growth. The researchers developed a model that combines aspects of both endogenous and Neoclassical growth theories. They found that changes in labor income share or government policies can shift the growth path from sustained growth to zero growth or vice versa. For example, regulating monopolies or raising wage rates can increase labor income share, leading to human capital accumulation and sustained growth. This synthesis model helps explain how policy shocks can influence the balance between physical and human capital accumulation, ultimately affecting the economy's growth trajectory.