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Endogenous Distribution, Politics, and Growth

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Author Info
Satya P. DAS () (Indian Statistical Institute - Delhi Centre)
Chetan CHATE (The Colorado College, Colorado Springs)

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Abstract

This paper generalizes the analysis of distributive conflict, politics, and growth developed by Alesina-Rodrick (1994). We construct a heteregenous-agent framework in which both growth and the distribution of wealth are endogenous. Due to adjustments in the distribution of wealth, the composition of factor ownership across households equalizes in the long run. This implies that the optiomal tax rate is the same for all households and equals the growth maximizing tax rate. Hence, there is no distributive conflict in the long run. When the model is augmented with a non-political redistributive policy, the model predicts that long run growth exhibits a negative monotonic relationship with respect to this policy, i.e., a redistributive policy that leads to a more equitable wealth distribution unambiguously reduces growth in the long run.

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Discussion Paper with number 2001019.

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Length: 19
Date of creation: 01 Jul 2001
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Handle: RePEc:ctl:louvir:2001019

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Related research
Keywords: Median voter Endogenous growth Wealth distribution Distribtuive conflict Redistributive policy

Other versions of this item:

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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