When the Rising Tide Lifts All Boats Differently: Income Distribution Matters

Abstract

In 2018, Alonzi, Drougas, and Condon (“ADC”) developed a simple macroeconomic model to analyze the effect of a less equal income distribution. This paper builds upon that paper by constructing a model incorporating a rising absolute income in both the high and low groups while at the same time allowing a higher proportion of income to go to the high-income group, but a lower proportion go to the low-income group. Notably, we find that the qualitative results of the “Reverse Robin Hood” case remain in the “Rising Tide” case but there are quantitative differences.