TERRA ECONOMICUS, , Vol. 14 (no. 2),

The article presents an approach for estimating the equilibrium prices of macrofactors – labor, capital and institutions. For this purpose production-institutional functions are introduced, linking produced net income with these three factors. A special indicator resulting from the multiplication of life expectancy and the Gini index serves as the criterion of institutional efficiency. Thus, the components of the indicator allows to take into account two properties of institutions including provision of basic guarantees and fundamental freedoms, with the number of employed people taken as the characteristic of labor, and investment in fixed assets – as the characteristic of capital. Econometric analysis has confirmed relevance of causal relationships based on the production-institutional functions for Russia, the USA and the UK. Such a generic three-factor model allows one to classify the possible modes of distribution of income. Calculations have shown that in the U.S. and UK a stable oligarchic model of income distribution has developed, with the income distribution in favor of capital. In Russia, this model has changed in the last decade toward the state-oligarchic type, with the income distribution in favor of capital and state. We introduce the notion of disequilibrium of the economy, representing the amount of price distortions for three macro-factors. Econometric parabolic functions are built for the three countries, showing dependency between economic growth rate and the indicator of disequilibrium. These functions enabled us to examine the relationship between economic equilibrium and production optimum, as well as to demonstrate how they actually may not align. The links between the notion of equilibrium and social justice, on the one hand, and between the optimum and economic efficiency, on the other hand, are uncovered. The issue of the «equitable» taxation depending on the institutional efficiency achieved is addressed.

Keywords: production-institutional functions; distribution model; disequilibrium of economy; institutional efficiency

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606