Distributional Implications of Imperfect Capital Markets

Abstract

Although a satisfactory theory of the distribution of income is yet to come,

significant progress has been made toward that goal by a series of attempts to

establish general theories of income distribution by combining existing piecemeal

theories into single synthetic models. One such example is Blinder's [6]

work which incorporates various elements of piecemeal theories. One of his

main conclusions is that inequality in income should not be ascribed to any

single factor, but should be conceived as resulting from the optimizing behavior

of individuals which can be affected by a number of factors. There is one

potential cause of inequality, however, which evaded his attention totally:

imperfect capital markets. Different income classes would be affected differentially

by the imperfection in capital markets.