Inequality and Economic Growth Savings Rate Marginal saving rate increasing decreasing in income Credit Market Constraints The Subset of the population the poor are unable to get loans This is according to the model Because they are not able to get loans they are not able to make profitable investments Political Economy high inequality make the government pass redistribution policies which tend to be foolish and create fiscal deficits for the country What does the empirical data suggest about the theories Evidence that Credit market Constraints weren t an issue because impact was only for a short time No strong evidence that high inequality Agriculture Income risk from weather flood droughts Irrigation helps limit the risk but does not completely deter it Ex Ante is before the realization of the risk Ex Post is decisions made after the realization of the risky outcome Some strategies are only one or the other while some are both Ex Ante and Ex Post Aggregate shocks hit everybody in the same area Idiosyncratic shocks only hit a particular farmer or field REVIEW MONDAY 6 7 SLH 102