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Garcia Penalosa

Publications

Distributional dynamics in a neoclassical growth model: The role of elastic labor supplyJournal articleCecilia Garcia-Peñalosa and Stephen J. Turnovsky, Journal of Economic Dynamics and Control, Volume 32, Issue 5, pp. 1399-1431, 2008

We examine the evolution of the distributions of wealth and income in a Ramsey model in which agents differ in their initial capital endowment and where the labor supply is endogenous. The assumption that the utility function is homogeneous implies that the macroeconomic equilibrium is independent of the distribution of wealth and allows us to characterize fully income and wealth dynamics. We find that although the dynamics of the distribution of wealth are similar under fixed and flexible labor, those of the income distribution are not. In response to a structural change, income inequality may move in opposite ways depending on whether or not the labor supply is fixed.
Endogenous strength of intellectual property rights: Implications for economic development and growthJournal articleCecilia Garcia-Peñalosa and Theo S. Eicher, European Economic Review, Volume 52, Issue 2, pp. 237-258, 2008

The key institution that determines sustained growth in R&D-based growth models is the strength of intellectual property rights, which are usually assumed to be exogenous. In this paper we endogenize the strength of the intellectual property rights and show how private incentives to protect these rights affect economic development and growth. Our model explains endogenous differences in intellectual property rights across countries as private incentives to invest in property rights generate multiple equilibria. We show that the resulting institutional threshold offers an explanation for why the effect of a transfer of institutions from one country to another depends on the quality of the institutions that were imported.
Labour market institutions and income inequalityJournal articleCecilia Garcia-Peñalosa and Daniele Checchi, Economic Policy, Volume 23, pp. 601-649, 2008

"Labour market institutions are a crucial determinant of wage inequality, the wage share in aggregate income, and the unemployment rate. Since these variables affect, in turn, the distribution of income across households, the question arises of whether stronger labour market institutions have an impact on income inequality. Institutions can in principle have conflicting effects. For example, a higher unemployment benefit tends to increase the wage share, which in turn reduces inequality, but it also increases the unemployment rate thus making the distribution of income more unequal. This paper examines what is the overall impact of labour market institutions on household income inequality. The evidence indicates that stronger institutions are associated with lower income inequality, but in some cases also with higher rates of unemployment. We explore the magnitude of this trade-off, and quantify the changes in inequality and unemployment that we would observe if a common labour standard were imposed on members of the European Union." Copyright (c) CEPR, CES, MSH, 2008.
Growth, Income Inequality, and Fiscal Policy: What Are the Relevant Trade-offs?Journal articleCecilia Garcia-Peñalosa and Stephen J. Turnovsky, Journal of Money, Credit and Banking, Volume 39, Issue 2-3, pp. 369-394, 2007

We develop an endogenous growth model with elastic labor supply, in which agents differ in their initial endowments of physical capital. In this context, the growth rate and the distribution of income are jointly determined. We then examine the distributional impact of different ways of financing an investment subsidy. Policies aimed at increasing the growth rate result in a more unequal distribution of pre-tax income, consistent with the positive correlation between income inequality and growth observed in the recent empirical literature. However, there is no conflict between efficiency and equity if inequality is measured in terms of the distribution of welfare.
The personal and the factor distributions of income in a cross-section of countriesJournal articleCecilia Garcia-Peñalosa and Emilie Daudey, The Journal of Development Studies, Volume 43, Issue 5, pp. 812-829, 2007

The shares of capital and labour in national income vary substantially both over time and across countries. This paper shows that the factor distribution of income is an essential determinant of the personal distribution of income. We use cross-country and panel data for a group of developed and developing countries to show that a larger labour share is associated with a lower Gini coefficient of personal incomes. This effect is not only statistically significant but also economically important. An increase in the labour share in Mexico to that observed in the US would reduce the Gini coefficient of the former by between two and five points.
How do Institutions Lead Some Countries to Produce So Much More Output than Others?Book chapterTheo S. Eicher, Cecilia Garcia-Peñalosa and U. Teksoz, In: Institutions, Development and Economic Growth, Theo S. Eicher and Cecilia Garcia-Peñalosa (Eds.), 2006, pp. 178-220, MIT Press, 2006
How do Institutions Lead Some Countries to Produce So Much More Output than Others?Book chapterTheo S. Eicher, Cecilia Garcia-Peñalosa and U. Teksoz, In: Institutions, Development and Economic Growth, Theo S. Eicher and Cecilia Garcia-Peñalosa (Eds.), 2006, pp. 178-220, MIT Press, 2006
The Personal Distribution of Income in a Stochastic Growth ModelBook chapterCecilia Garcia-Peñalosa and Stephen J. Turnovsky, In: Economic Growth and Distribution: On the Nature and Causes of the Wealth of Nation, N. Salvadori (Eds.), 2006, Edward Elgar, 2006

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Bertola, G., Foellmi, R., and Zweimüller, J.: Income Distribution in Macroeconomic ModelsJournal articleCecilia Garcia-Peñalosa, Journal of Economics, Volume 89, Issue 2, pp. 187-190, 2006

No abstract is available for this item.
Institutions, Development, and Economic GrowthBookMIT Press Books, Cecilia Garcia-Peñalosa and Theo S. Eicher (Eds.), 2006, Volume 1, Number 0262050811, 304 pages, The MIT Press, 2006

The determinants of economic growth and development are hotly debated among economists. Financial crises and failed transition experiments have highlighted the fact that functioning institutions are fundamental to the goal of achieving economic growth. The growth literature has seen an abundance of empirical studies on the influence of institutions and the mechanisms by which institutions affect development. This CESifo volume provides a systematic overview of the current scholarship on the impact of institutions on growth. The contributors, all internationally prominent economists, consider theoretical and empirical relationships between institutions and growth. Concepts covered include "appropriate institutions" (the idea that different institutional arrangements are appropriate at different stages of economic development); liberalized credit markets; the influence of institutions on productivity; institutional and regulatory reforms in the OECD; how innovation and entrepreneurship influence growth (including an analysis of patent activity in the United States from 1790 to 1930); the endogeneity of institutions as seen in the recruitment of elites by higher education institutions; the effect of economic development on transitions to democracy; and technology adoption in agriculture.