IDEAS home Printed from https://ideas.repec.org/a/aea/aerins/v7y2025i2p250-67.html
   My bibliography  Save this article

Growth and Redistribution: The Hedging Perspective

Author

Listed:
  • Larry Samuelson
  • Jakub Steiner

Abstract

We investigate the impact of wealth redistribution on economic growth, building on Kelly's (1956) optimal investment portfolio theory. A growth-optimal policy redistributes wealth from "lucky" overperforming individuals to underperforming ones, minimizing the systematic component of this redistribution in a myopic fashion. That is, the optimal policy minimizes the discrepancy between endowments and outcomes, counterfactually taking outcomes as independent of endowments. The myopia in this result follows from a decoupling argument that allows us to model the planner as independently choosing a growth-maximizing policy and a pattern of wealth circulation.

Suggested Citation

  • Larry Samuelson & Jakub Steiner, 2025. "Growth and Redistribution: The Hedging Perspective," American Economic Review: Insights, American Economic Association, vol. 7(2), pages 250-267, June.
  • Handle: RePEc:aea:aerins:v:7:y:2025:i:2:p:250-67
    DOI: 10.1257/aeri.20240456
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/aeri.20240456
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

    File URL: https://www.aeaweb.org/articles/materials/23110
    Download Restriction: no

    File URL: https://www.aeaweb.org/articles/materials/23111
    Download Restriction: no

    File URL: https://www.aeaweb.org/articles/materials/23112
    Download Restriction: no

    File URL: https://libkey.io/10.1257/aeri.20240456?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    --->

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Andrew Caplin & Mark Dean, 2013. "Behavioral Implications of Rational Inattention with Shannon Entropy," NBER Working Papers 19318, National Bureau of Economic Research, Inc.
    2. Filip Matêjka & Alisdair McKay, 2015. "Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model," American Economic Review, American Economic Association, vol. 105(1), pages 272-298, January.
    3. Arthur Robson & Larry Samuelson & Jakub Steiner, 2023. "Decision Theory and Stochastic Growth," American Economic Review: Insights, American Economic Association, vol. 5(3), pages 357-376, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrew Caplin & Mark Dean & John Leahy, 2022. "Rationally Inattentive Behavior: Characterizing and Generalizing Shannon Entropy," Journal of Political Economy, University of Chicago Press, vol. 130(6), pages 1676-1715.
    2. Mensch, Jeffrey, 2021. "Rational inattention and the monotone likelihood ratio property," Journal of Economic Theory, Elsevier, vol. 196(C).
    3. Benjamin Hébert & Michael Woodford, 2018. "Information Costs and Sequential Information Sampling," NBER Working Papers 25316, National Bureau of Economic Research, Inc.
    4. Lunn, Pete & Somerville, Jason J., 2015. "Surplus Identification with Non-Linear Returns," Papers WP522, Economic and Social Research Institute (ESRI).
    5. Emerson Melo, 2022. "On the Distributional Robustness of Finite Rational Inattention Models," Papers 2208.03370, arXiv.org, revised May 2023.
    6. Monte, Daniel & Linhares, Luis Henrique, 2023. "Stealth Startups, Clauses, and Add-ons: A Model of Strategic Obfuscation," MPRA Paper 115926, University Library of Munich, Germany.
    7. Figueroa, Nicolás & Guadalupi, Carla, 2021. "Testing the sender: When signaling is not enough," Journal of Economic Theory, Elsevier, vol. 197(C).
    8. Matveenko, Andrei & Starkov, Egor, 2023. "Sparking curiosity or tipping the scales? Targeted advertising with consumer learning," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 172-192.
    9. Le Treust, Maël & Tomala, Tristan, 2019. "Persuasion with limited communication capacity," Journal of Economic Theory, Elsevier, vol. 184(C).
    10. Jakub Steiner & Colin Stewart & Filip Matějka, 2017. "Rational Inattention Dynamics: Inertia and Delay in Decision‐Making," Econometrica, Econometric Society, vol. 85, pages 521-553, March.
    11. Civelli, Andrea & Deck, Cary & Tutino, Antonella, 2022. "Attention and choices with multiple states and actions: A laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 199(C), pages 86-102.
    12. Matysková, Ludmila & Rogers, Brian & Steiner, Jakub & Sun, Keh-Kuan, 2020. "Habits as adaptations: An experimental study," Games and Economic Behavior, Elsevier, vol. 122(C), pages 391-406.
    13. Roc Armenter & Michèle Müller-Itten & Zachary Stangebye, 2020. "Rational Inattention via Ignorance Equivalence," Working Papers 20-24, Federal Reserve Bank of Philadelphia.
    14. Larry Samuelson & Jakub Steiner, 2024. "Constrained data-fitters," ECON - Working Papers 460, Department of Economics - University of Zurich.
    15. Matveenko, Andrei & Mikhalishchev, Sergei, 2021. "Attentional role of quota implementation," Journal of Economic Theory, Elsevier, vol. 198(C).
    16. Camille Cornand & Frank Heinemann, 2018. "Experiments on macroeconomics: methods and applications," Working Papers 1810, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    17. Matysková, Ludmila & Montes, Alfonso, 2023. "Bayesian persuasion with costly information acquisition," Journal of Economic Theory, Elsevier, vol. 211(C).
    18. Camille Cornand & Frank Heinemann, 2018. "Experiments on macroeconomics: methods and applications," Working Papers halshs-01809937, HAL.
    19. Tommaso Denti & Massimo Marinacci & Aldo Rustichini, 2022. "Experimental Cost of Information," American Economic Review, American Economic Association, vol. 112(9), pages 3106-3123, September.
    20. Sergei Mikhalishchev & Vladimir Novak, 2024. "Inattention, Stability, and Reform Reluctance," Working and Discussion Papers WP 8/2024, Research Department, National Bank of Slovakia.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aerins:v:7:y:2025:i:2:p:250-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.