Discrimination, Growth, and Inequality

Chapter 8 studies the dynamic interdependence between growth, distribution, and discrimination. Discrimination is conducted against different people in different forms over human history in different parts of the world. In modern times racial and gender discrimination is still conducted in different parts of the world. Although there are some studies about discrimination in economics, it is argued that there are only a few formal economic models which explicitly deal with economic growth and distribution in income and wealth with discrimination. This chapter focuses on the role of discrimination in interdependence between growth and dynamics of inequality in income and wealth. This chapter introduces the basic model with wealth and income distribution with discrimination, examines the dynamic properties of the model, and simulates the model with three groups. It also studies the effects of changes in the discrimination rate on wage income, the discrimination rate on wealth, the discrimination rate on consumption, and discrimination associated with positive reactions of the discriminated.