TITLE:
Work and Income Sharing in a Rural Economy: Effect on Economic Growth and Welfare
AUTHORS:
Nobuyuki Iwai, Stanley R. Thompson
KEYWORDS:
Work and Income Sharing, Rural Economy, Endogenous Growth Model, Welfare in Developing Countries, Technology Adaptation
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.6,
June
13,
2014
ABSTRACT: An endogenous growth model is developed to
explore the effect of work and income sharing (WIS) on economic growth and
welfare in a developing rural economy. The practice of WIS is a mechanism which
converts incremental diversity of risk into volatility reduction and overall
welfare gain. However, the effect on economic growth is sector specific. WIS in
the intermediate goods sector has a pro-growth effect through higher investment
returns while in the agricultural sector it has an anti-growth effect through
lower precautionary savings. WIS also decreases the level of regional government
subsidies needed to achieve the optimal growth rate.