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Distributive Politics and Economic Growth

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  • Alesina, Alberto F
  • Rodrik, Dani

Abstract

This paper studies the relationship between political conflict and economic growth in a simple model of endogenous growth with distributive conflicts. We study both the case of two `classes' (workers and capitalists) and the case of a continuum distribution of agents, characterized by their relative shares of capital and labour. We establish several results concerning the relationship between the political influence of the two groups and the level of taxation, public investment, redistribution of income and growth. For example, we show that policies which maximize growth are optimal only for a government that cares only about the `capitalist'. Also, we show that in a democracy (where the `median voter theorem' applies) the rate of taxation is higher and the rate of growth lower, the more unequal is the distribution of wealth. We present empirical results consistent with these implications of the model.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 565.

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Date of creation: Jun 1991
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Handle: RePEc:cpr:ceprdp:565

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Keywords: Endogenous Growth; Income Distribution; Political Conflict;

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  1. Terrones, M., 1990. "Influence Activities And Economic Growth," UWO Department of Economics Working Papers 9006, University of Western Ontario, Department of Economics.
  2. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  3. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  4. Persson, Torsten & Tabellini, Guido, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," Department of Economics, Working Paper Series qt00x7n68q, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Berg, Andrew & Sachs, Jeffrey, 1988. "The debt crisis structural explanations of country performance," Journal of Development Economics, Elsevier, vol. 29(3), pages 271-306, November.
  6. Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers 539, UCLA Department of Economics.
  7. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  8. Mohtadi, Hamid & Roe, Terry L., 1991. "Political Economy of Endogenous Growth (Revised)," Bulletins 7502, University of Minnesota, Economic Development Center.
  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  10. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
  11. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  12. repec:fth:coluec:595 is not listed on IDEAS
  13. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 93-107, May.
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