rules stability and growth abstract this paper examines two systems of fiscal redistribution in the context of a growing economy subject to unexpected shocks rules and discretion under the former system the tax system is in place and is known to households contemplating investment decisions under the second redistribution is decided upon only after the investment decisions have been made i find that rules always lead to faster capital accumulation and growth but political support for them is only likely to occur in a stable economy income inequality adversely affects the likelihood of adopting rules especially so in an unstable economy

community membership aspirations the link between inequality and redistribution revisited the issue at stake is to explain why redistributive policies may vary so greatly for a given distributional skewness to this end we abandon the stylized median voter and study how distributional tensions can act in many different ways depending on social affinity between the different economic classes and their prospect of upward or downward mobility in particular we consider that socioeconomic group membership through its implied social interactions and peer effects is an important determinant of an individual s outcome hence agents while voting on a social contract must take into account the consequences of their choice over their ex post belonging to a particular community this allows us to shed light on how the endogenous sorting of the population into clusters may interact with the balance of political power leading to a non monotonic relationship through the pattern of community formation in the economy between inequality and the pressure for redistributive policies

oligarchy democracy inequality and growth abstract this paper analyses the dynamics of inequality democratization and economic development in a political economy model of growth where education is both the engine of growth and a determinant of political participation in a context with imperfect capital markets we investigate the incentives for an educated oligarchy to subsidize the poor s education and to initiate a democratic transition we characterize the equilibrium patterns of political institutions income distribution and growth as a function of the initial income and inequalities in particular we identify circumstances under which the elite promotes the endogenous emergence of a middle class for purely political economy reasons a simple linear infinite horizon framework is then presented in this setting we discuss the importance of historical dependence for long run social stratification and redistribution

income distribution political instability and investment abstract this paper successfully tests on a sample of 71 countries for the period 1960 85 the following hypotheses income inequality by fuelling social discontent increases sociopolitical instability the latter by creating uncertainty in the politico economic environment reduces investment as a consequence income inequality and investment are inversely related since investment is a primary engine of growth this paper identifies a channel for an inverse relationship between income inequality and growth we measure socio political instability with indices which capture the occurrence of more or less violent phenomena of political unrest and we test our hypotheses by estimating a two equation model in which the endogenous variables are investment and an index of socio political instability our results are robust to sensitivity analysis on the specification of the model and the measure of political instability and are unchanged when the model is estimated using robust regression techniques

side payments in marketing side payments known politely as gainsharing and pejoratively as bribery are prevalent in marketing indeed many management schools have added ethics modules to their basic marketing courses to discuss these issues and there is much discussion of side payments in the literature e g adams 1995 borrus borrus amy 1995 a world of greased palms business week november 6 36 38 mauro mauro paolo 1997 why worry about corruption international monetary fund washington d c mohl mohl bruce 1996 auto dealers color surveys to polish image buyer s say salesmen tamper with makers questionnaires boston globe august 11 b1 b6 murphy murphy kate 1995 corporate gifts what s naughty or nice business week december 11 122 peterson peterson barbara s 1996 taxing question will the government make you pay for your next travel benefits frequent flyer february 27 30 and rose ackerman rose ackerman susan 1996 bribes and gifts proc conf economics values and organization april 19 20 yale university new haven ct we seek to provide insight with respect to one class of marketing side payments we hope that our analyses clarify some of the issues and suggest how these side payments affect marketing activities we begin by focusing on one common example of potential side payments salesforce ratings of internal sales support we derive two formal results and speculate on how these results generalize the two results are 1 that having one group of employees rate another implies that there are almost always incentives for side payments but 2 the side payments need not reduce the firm s profit at least in theory the firm is always able to revise the reward system to factor out these side payments the first result based on a straightforward proof has important practical implications for managers who may wish to preclude side payments they may be unable to design a ratings based reward system that does not have inherent incentives for side payments the second result in our opinion is quite surprising it suggests that marketing managers might be advised to invest more time into understanding how side payments affect employee reactions to reward systems they might want to reconsider costly efforts to monitor police or preclude such side payments while our results do not substitute for a moral discussion of side payments we hope that the formal structure for one common marketing situation provides valuable insight the system we analyze is based on a practical managerial problem we have observed the salesforce evaluates a sales support group with a real valued rating the sales support group is rewarded based on that rating whereas the sales force is rewarded based on outcomes such as sales or customer satisfaction that indicate incremental profits to the firm the reward to the salesforce might also depend upon how it rates sales support for example the salesforce might be held to a higher standard whenever it rates sales support as excellent we argue in the paper that the firm will want this to happen in addition the salesforce might ask for a side payment from the sales support group as compensation for high ratings we cast the practical problem as a formal game and incorporate the following issues 1 incremental actions taken by the salesforce and by sales support are perceived to be onerous 2 the measure of incremental profit is a noisy measure 3 both the salesforce and sales support are risk averse 4 given the reward system imposed by the firm both the salesforce and sales support will maximize their well being and 5 given the structure of the reward system the firm will seek to maximize expected profits we first show that there are almost always incentives for side payments specifically we demonstrate that sales support is better off with a side payment while the salesforce is no worse off this is not surprising because the reward to sales support is increasing in the rating while in the absence of a side payment the salesforce will select a rating such that its net marginal returns to increasing the rating are zero the exception occurs when the rating is constrained by the firm to be less than this optimal rating but even then there might be incentives for side payments we next show that the firm can anticipate these side payments and design a reward system to factor them out at no loss of profit the intuition is straightforward the firm first adjusts the marginal returns in the reward functions for sales support and for the salesforce such that they will each take the optimal actions even though they engage in side payments then the firm adjusts their fixed compensation so that the firm extracts its full profit the proof is difficult because we must show that adjusted reward systems exist and we must show that they allow the full profit to be extracted throughout the paper we discuss the practical implications of our results we close by highlighting future research opportunities

bribing votes a new explanation to the inequality redistribution puzzle in ldc s the recent empirical literature on redistribution and developmentemphasizes two main evidences i more redistribution generallyinduces higher growth rates and ii more inequality does notnecessarily increase the political demand for redistribution these stylized facts are at odds with the correlations observedin developed countries several theoretical arguments can beadvanced to explain these puzzles in this paper it is shownthat vote purchases may be seen as an additional argument toexplain puzzle ii we formalize this idea and examine theconditions under which vote bribes may be an obstacle toredistribution and thus to growth in a developing economy

comment cross brand pass through fact or artifact cross brand pass through implies that a retailer responds to wholesale promotional support from a target brand by changing the retail prices of competitive brands besanko et al 2005 model a target brand s retail price as a function of its own and other brands wholesale prices using 780 observations 15 price zones 52 weeks and take the many significant coefficients for other brands wholesale prices that they find as evidence of cross brand pass through because price zones do not react independently to wholesale prices when they set a brand s retail price besanko et al s 2005 estimation overstates the number of independent observations by a factor of 15 when we correct for this overstatement of independent observations we find that the number of stable significant coefficients for other brands wholesale prices is lower than one would expect by chance we conclude that there is no evidence of cross brand pass through in the 11 categories analyzed by besanko et al 2005

redistributing income under proportional representation although majoritarian decision rules are the norm in legislatures relatively few democracies use simple majority rule at the electoral stage adopting instead some form of multiparty proportional representation moreover aggregate data suggest that average income tax rates are higher and distributions of posttax income flatter in countries with proportional representation than in those with majority rule while there are other differences between these countries this paper explores how variations in the political system per se influence equilibrium redistributive tax rates and income distributions a three party proportional representation model is developed in which taxes are determined through legislative bargaining among successful electoral parties and the economic decision for individuals is occupational choice political economic equilibria for this model and for a two party winner take all majoritarian system are derived and compared

social capital as a product of class mobilization and state intervention industrial workers in kerala india abstract this paper argues that state intervention and class mobilization in the state of kerala india have produced two forms of social capital kerala s high level of social development and successful redistributive reforms are a direct result of mutually reinforcing interactions between a programmatic labor movement and a democratic state this synergy between state and labor has also created the institutional forms and political processes required for negotiating the class compromises through which redistribution and growth can be reconciled these dynamics are explored through a close examination of both the organized factory sector and the unorganized informal sector

income distribution and macroeconomics this paper analyzes the role of wealth distribution in macroeconomics through investment in human capital it is shown that in the presence of credit markets imperfections and indivisibilities in investment in human capital the initial distribution of wealth affects aggregate output and investment both in the short and in the long run as there are multiple steady states this paper therefore provides an additional explanation for the persistent differences in per capita output across countries furthermore the paper shows that cross country differences in macroeconomic adjustment to aggregate shocks can be attributed among other factors to differences in wealth and income distribution across countries

does education expansion increase intergenerational mobility education expansion may lead to over education where the social connections of parents may exert more significant influence on the return to education of children with the assumption of a positive correlation between return on human capital and parental income in the presence of over education we show that i the expansion of education may cause horizontal inequity in education opportunities and inefficiency in human capital accumulation ii the positive correlation between return on human capital and parental income causes a more persistent intergenerational immobility iii an expansion of education especially higher education leads to more persistent intergenerational immobility

pecuniary emulation inequality and growth abstract we study a two class growth model in which agents care about both consumption and the social perception of their wealth rank the latter determines the social status enjoyed by agents social perceptions are based upon noisy signals of wealth and in equilibrium there is incomplete separation of classes the steady growth rate of the economy increases with the full information status differential between classes and contrary to the growth model without status it is affected by the initial level of wealth inequality both too much equality and too much inequality are detrimental to economic growth

political equilibrium income distribution and growth this paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy the model has three main features first very different patterns of income distribution are conducive to high growth at different levels of per capita income second growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups thus potentially enabling them to invest in human capital third the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted in which case growth is enhanced or prevented in which case growth is stopped using a non overlapping generations model with voting i derive several empirical implications in particular the model implies an inverted u relation between levels of inequality and levels of income in cross sections but not necessarily in time series a result that seems consistent with a number of empirical studies

income distribution and growth in east asia it is widely believed that the east asian economies performed exceptionally well not only in generating growth but also in keeping inequality low this study tries to answer the questions raised by the claims of exceptionality of income distribution in east asia central findings are that only japan korea and taiwan have legitimate claims to low inequality that the east asian economies distinguished themselves by their ability to translate high profit shares into high savings and investment rates and that low inequality and high profit shares coexisted primarily due to the unusually even distribution of wealth

ethics faith and profit exploring the motives of the u s fair trade social entrepreneurs although fair trade has grown exponentially in the u s in recent years we do not have a clear understanding of why small u s firms choose to participate in it to answer this question we use a qualitative case study approach and grounded theory analysis to explore the motivations of 35 small fair trade businesses we find that shared values ethical religious or business and the desire to help others altruism often triggered by a critical incident lead social entrepreneurs to found and sustain fair trade businesses the relationship between shared values and engagement in fair trade and the relationship between altruism and engagement in fair trade are strengthened by four motivating factors direct relationships with producers support for social causes the desire for the preservation of craftsmanship and the desire to share aesthetic products these links are strengthened by four facilitating factors which make fair trade engagement easier the acquisition of business knowledge family member involvement in the firm assistance from faith communities and assistance from the fair trade community additional analysis reveals three types of fair trade social entrepreneurs ethics first or ethical entrepreneurs primarily motivated by human rights and social justice concerns faith first or faithful fair traders motivated primarily by their religious faith and business first or benevolent businesspeople motivated by what they perceive to be an opportunity to build a successful business while simultaneously doing good and helping others

democracy as an equilibrium observation shows that while democracy is fragile in poor countries it is impregnable in developed ones to explain this pattern i develop a model in which political parties propose redistributions of incomes observe the result of an election and decide whether to comply with the outcome or to launch a struggle for dictatorship democracy prevails in developed societies because too much is at stake in turning against it more income can be redistributed in developed than in poor countries without threatening democracy limits on redistribution arise endogenously so that constitutions are not necessary for democracy to endure a democratic culture characterizes the equilibrium

talent growth and income distribution a model with heterogeneous individuals and bequests between generations is constructed to analyze income distribution and educational choice the introduction of an imperfection in the credit market is shown to influence the allocation of talent both ability and bequest are of relevance in deciding whether or not to invest in education with learning by doing between generations the allocation of talent affects not only the level of production but also the growth rate copyright 1993 by the editors of the scandinavian journal of economics

inequality growth and democracy the analysis of the relationship between inequality and economic growth in distinct politi coeconomic environments has been one of the central preoccupations of the extensive theoretical and empirical work on growth in the last decade the authors argue that the empirical evidence available to date strongly indicates the relevance of this work for understanding the elusive causal connection between economic development and democracy the state of the literature suggests considerable sophistication in conceptualizing the direct economic effects of inequality and contains critical insights into politically unconstrained policy making aimed at the alleviation of their negative economic impact however the political feasibility of the recommended policy measures and the politically mediated effects of inequality and redistributive policy on growth and on the strength and stability of democratic regimes are understood less well the authors discuss the critical factors influencing these effects and sketch several approaches to creating a comprehensive politicoeconomic account of the interaction between inequality redistributive policy making and political regimes

demographic structure and the political economy of education subsidies this paper investigates the politico economic impact of a society s age structure on the extent of public funding of education education subsidies serve to internalize positive spillovers of human capital investment but redistribute resources from the working old to the non working young thus creating a conflict of interest between the two generations the political process is characterized by a representative democracy

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

income distribution and investment abstract after being the subject of a heated debate during the sixties and the seventies the relation between income distribution and growth has received renewed attention in recent years the new literature has focused on three channels whereby this relation can occur imperfections in capital markets voting on fiscal policy and political instability in all these approaches growth in or outside the steady state is the result of investment in physical or human capital therefore these theories can also be stated and tested in terms of the effects of income distribution on investment this has the double advantage of reducing the complexity of a necessarily brief survey and of bringing out more clearly the main elements of novelty in this literature so far empirical implementations of these theories have in general been restricted to reduced form regressions of growth or equivalently investment on income distribution and other variables in this survey i take a step further and test the three approaches by explicitly estimating the role of the imperfections in capital markets of government expenditure and of political instability in mediating the effects of income distribution on investment

intra generational equity and sustainable welfare a time series analysis for the uk and sweden this paper discusses the importance of intra generational equity to sustainable development it outlines a number of methodologies for measuring income inequality in the economy and presents several possible ways of incorporating the impact of distributional effects into measures of welfare in the economy the authors highlight in particular an index developed by atkinson atkinson a b 1970 distributive politics and economic growth q j econ may 465 490 based on the social welfare model this method possesses two main advantages over other methods firstly it is expressed directly in terms of social well being secondly value judgements incorporated into the measure are made explicit through the parameter o which expresses society s degree of aversion to income inequality the paper calculates the value of the atkinson index for two case study countries sweden and the uk between 1950 and 1996 for a central estimate of o0 8 the results show that the welfare loss due to inequalities in the distribution of income varied between 5 and 10 for sweden and between 6 and 14 for the uk with the higher values coming towards the end of the period the paper explores the sensitivity of these results to changes in the value of o for the case of the uk and discusses the relevance of the work to the measurement of sustainable welfare 2000 elsevier science b v all rights reserved

revisiting the threshold effect of remittances on total factor productivity growth in south asia a study of bangladesh and india abstractboth bangladesh and india are among the top recipient of remittances in absolute terms however in relative terms remittances as a per cent of gdp the two countries stand at 6 1 and 2

shared quality uncertainty and the introduction of indeterminate goods the purpose of this paper is to introduce a new category of goods indeterminate goods which will be compared with the classical framework of experience search and credence goods nelson 1970 darby and karni 1973 this concept sheds new light on the nature and status of quality uncertainty through the following hypothesis uncertainty about the product s quality can be shared by all agents of the market and this uncertainty can be non neutral and disrupt the market we identify three types of shared uncertainty about the product s characteristics and the corresponding problems that can arise shared uncertainty due to the emergence of a product hirschman 1974 shared uncertainty concerning the past of a product basing ourselves on the art market and finally shared uncertainty regarding the future impacts of a product through empirical data on product safety

education subsidies social security and growth the implications of a demographic shock we develop a three period overlapping generations model in which individual decisions about education are the engine of growth in this setting we investigate the normative role of education subsidies and old age pensions calibrating this model on empirical data it is shown that the case for positive pension benefits is rather weak on the optimal path an important part of education subsidies should be financed by lump sum taxes on retirees we also examine how these transfers should be adjusted in the presence of a baby boom baby bust demographic shock it turns out that an appropriate policy could be to increase education when the baby boom generation is at work labor productivity will then be higher when aging peaks so that the pension bill can be financed without reducing welfare for the baby bust generations

competition in corruptible markets firms seeking business opportunities often face corruptible agents in many markets this paper investigates the marketing strategy implications for firms competing for business and for the buyer in a corruptible market we consider a setting in which a buyer a firm or government seeks to purchase a good through a corruptible agent supplier firms that may or may not be a good fit compete to be selected by the agent only the agent observes whether a firm is a good fit corruption arises due to the agent s incentive to select a nondeserving firm in exchange for bribes intuitively and as expected a sufficiently large monitoring of the agent eradicates corruption interestingly however increasing the monitoring from an initial low level can backfire making the agent more likely to select a nondeserving firm this nonmonotonic agent behavior makes it difficult for the buyer to reduce corruption the implication is that the buyer should choose either to be ignorant or to take drastic measures to limit

distribution and development in a model of misgovernance abstract this paper presents an analysis of bureaucratic corruption income inequality and economic development the analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government in accordance with empirical evidence the model predicts a positive relationship between corruption and inequality and a negative relationship between corruption and development

mainstreaming fair trade coffee from partnership to traceability summary this article analyzes the recent growth of fair trade and the mainstreaming of this previously alternative arena focusing on coffee i identify a continuum of buyers ranging from mission driven enterprises that uphold alternative ideas and practices based on social ecological and place based commitments to quality driven firms that selectively foster fair trade conventions to ensure reliable supplies of excellent coffee to market driven corporations that largely pursue commercial industrial conventions rooted in price competition and product regulation using a commodity network approach my analysis illuminates the impacts of diverse buyer relations on producer groups and how relations are in some cases shifting from partnership to traceability

credit markets with differences in abilities education distribution and growth this article presents an endogenous growth model in which credit markets affect time allocation of individuals with different educational abilities credit markets allow the more able to specialize in studying and the less able to specialize in working this specialization can increase growth and welfare this article also shows that in economies with high low levels of education abilities the opening of credit markets induces a more disperse equal income distribution the role of intergenerational transfers in overcoming the absence of credit markets is also discussed as well as other forms of credit markets imperfections

is financial openness bad for education a political economy perspective on development abstract this paper presents a simple model of the links between education democratization and economic development in a context of imperfect capital markets we investigate the incentives for a capitalist oligarchy to subsidize the education of poor workers and to initiate a political transition it is shown that international financial liberalization while stimulating physical capital accumulation reduces the capitalist elite willingness to subsidize domestic human capital accumulation in the medium run it thus delays without necessarily impeding the process of democratization

relationships between household consumption and inequality in the indian states current evidence on the relationships between growth and inequality is predominantly based on cross country data sets or panel data sets covering a small number of time periods but these relationships being fundamentally dynamic in nature need to be considered over a much longer time horizon available state level results from the national sample surveys in india provide such an opportunity this article uses this unique data set to examine the interrelationships between average consumption and inequality within states and test for causality distributional patterns of growth vary but there is strong evidence in many instances of a strong negative effect of initial inequality on subsequent growth

why are bad products so hard to kill it is puzzling that firms often continue to invest in product development projects when they should know that demand will be low we argue that bad products are hard to kill because firms face an inherent conflict when designing managers incentives rewarding success encourages managers to forge ahead even when demand is low to avoid investing in low demand products the firm must also reward decisions to kill products however rewarding managers for killing products effectively undermines the rewards for success the inability to resolve this tension forces the firm to choose between paying an even larger bonus for success and accepting continued investment in low demand products we explore the boundaries of this argument by analyzing how the timing of demand information affects product investment decisions

sustaining inter organizational relationships across institutional logics and power asymmetries the case of fair trade this paper explores an empirical puzzle namely how inter organizational relationships can be sustained between organizations that draw upon distinctive and potentially conflicting institutional logics under conditions of power asymmetry this research analyses cases of these relationships and suggests some key conditions underlying them examining relationships between fair trade organizations and corporate retailers a series of contingent factors behind the dynamic persistence of such relationships are proposed namely the presence of pre existing hybrid logics the use of boundary spanning discourses joint tolerance of conflict and co creation of common rules these four elements are supported by a fifth mediating factor i e the presence and use of a fair trade certification system in the collaboration the latter appears as a central vehicle facilitating cross logic relationships it can be seen as a boundary object embodying a series of narratives and discourses that are open to multiple interpretations corresponding to the dominant institutional logics of each partner organization

capital taxation under political constraints this paper studies optimal dynamic tax policy under the threat of political reform a policy will be reformed ex post if a large enough coalition of citizens supports reform thus sustainable policies are those that will continue to attract enough political support in the future we find that optimal marginal capital taxes are either progressive or u shaped so that savings are subsidized for the poor and or the middle class but are taxed for the rich u shaped capital taxes always emerge when individuals political behavior is purely determined by economic motives

who gains from non collusive corruption non collusive corruption i e corruption that imposes an additional burden on business activity is particularly widespread in low income countries we build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption we find that credit market imperfections by generating rents for the incumbent entrepreneurs create strong incentives for corrupt behavior by state officials however non collusive corruption not only redistributes income from non officials towards officials but also within the group of potential entrepreneurs if borrowing is limited bribes prevent poorer but talented individuals from starting a business but this is likely to benefit those who may enter anyway the cost of capital is lower and there is less competition on the goods markets

factor shares and savings in endogenous growth in models of steady investment driven growth an individual s propensity to save depends on how much of his income is drawn from accumulated factors of production capital rather than from nonaccumulated factors when agents are heterogeneous in this respect growth oriented policies have distributional consequences and in the absence of lump sum redistribution their implementation faces political constraints if the median voter is capital poor relative to the economy s representative agent political interactions tend to slow down growth when policy acts on capital s income share and tend to accelerate it when investment subsidies are the policy instrument of choice copyright 1993 by american economic association

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

the impact of collective action on economic development empirical evidence from kerala india summary public participation is generally assumed to be a necessary if not fundamental condition for development most studies do not however question the kind and level of collective action that would be desirable this paper provides a novel empirical analysis of the impact of collective action on economic development using data for south india the paper models collective action as endogenous to economic development and distinguishes between its static and dynamic properties the results show that while excessive activism may harm state income collective action in the context of responsible bargaining systems may contribute toward increased economic development

growth learning and redistributive policies abstract this paper develops an endogenous growth model with redistributive taxation in which the growth rate of the economy affects the agents preferences over redistributive policies and therefore the equilibrium level of taxation the main mechanism through which the growth rate affects policy preferences is by changing the ability of the agents to learn their positions in the future distribution of incomes the main result of the paper is that during periods of growth the society opts for less taxation and less redistribution the model also predicts that growing economies are characterized by higher inequality in the distribution of income and by greater mobility of agents within income classes over time

risk bearing and the theory of income distribution this paper develops the stochastic theory of distribution with a dynamic model which focuses on the role of incomplete insurance in generating inequality unlike previous work our approach takes explicit account of the reason for market incompleteness in modeling agents behaviour in particular the amount of risk borne is endogenous using a model of growth with altruism in which agents are risk averse and there is moral hazard we show that lineage wealth follows a markov process which converges globally to an ergodic distribution this also represents the long run population distribution of wealth we discuss the role of particular assumptions such as availability of production loans and unboundedness of utility in yielding the qualitative properties of the distribution of wealth the choice of occupation and the prevention of poverty traps