Working Paper #2008-071
Public Capital and Income Distribution: a Marriage of Hicks & Newman-Read
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.
- Keywords
-
- Income distribution
- public capital
- economic growth
- JEL codes
-
- D31
- H54
- O41
- UNU-MERIT
- Working
- Papers
- ISSN
- 1871-9872
Cite this as
APA 7th ed.Getachew, Y. Y. (2008). Public Capital and Income Distribution: a Marriage of Hicks & Newman-Read (UNU-MERIT Working Paper No. 2008-071). UNU-MERIT. https://unu-merit.nl/publications/working-papers/abstract/?id=3563