ENDOGENOUS GROWTH AND INCOME-DISTRIBUTION

A theory of endogenous growth is based on an investment possibility fu nction, relating the growth rate of output to the ratio of gross inves tment to output and the growth rate of employment as formulated origin ally by M. F. Scott. Consumers maximize an intertemporal utility funct ion and producers maximize the value of the firm. The long-run rate of growth depends on consumer preferences, the exogenous growth of labor supply and the tax rate on output. The functional distribution of inc ome is determined along with the investment ratio in the steady state. Labor market imperfections and real wage inertia induce transition pr ocesses, which are relevant for medium term growth.