A heterogeneous-agent Model of Growth and Inequality for the UK- Do Planning and Infrastructure matter? A Supplementary note

Abstract This paper builds on Yang et al. (Open Econ Rev 32(1):37–69, 2021) which analysed the effect of wealth inequality on UK economic growth in recent decades with a heterogeneous-agent growth model where agents can enhance individual productivity growth by undertaking entrepreneurship. In this supplementary note we examine whether ease of planning and infrastructure spending also contribute to productivity growth, as argued by some policymakers. The model is estimated and tested by indirect inference. The original model was not rejected in its match to the data behaviour. We find the enhanced model contributes no improvement of the match. The model with only planning and infrastructure is strongly rejected.