Endogenous Distribution, Politics and Growth
AbstractThis paper generalizes the analysis of distributive conflict, politics, and growth developed by by Alesina-Rodrik (1994). We construct a heterogenous-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 optimal 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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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 310.
Length: 34 p.
Date of creation: 2002
Date of revision:
Median Voter; Endogenous Growth; Wealth Distribution; Distributive Conflict; Redistributive Policy.;
Other versions of this item:
- Satya P. DAS & Chetan CHATE, 2001. "Endogenous Distribution, Politics, and Growth," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-11-04 (All new papers)
- NEP-DEV-2002-11-04 (Development)
- NEP-PKE-2002-11-04 (Post Keynesian Economics)
- NEP-POL-2002-11-04 (Positive Political Economics)
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