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.
Cite this paper
Iwai, N. and Thompson, S. (2014) Work and Income Sharing in a Rural Economy: Effect on Economic Growth and Welfare. Theoretical Economics Letters
, 386-396. doi: 10.4236/tel.2014.46050
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