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Work and Income Sharing in a Rural Economy: Effect on Economic Growth and Welfare

DOI: 10.4236/tel.2014.46050, PP. 386-396

Keywords: Work and Income Sharing, Rural Economy, Endogenous Growth Model, Welfare in Developing Countries, Technology Adaptation

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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.

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