Economic Growth, (Re-)Distributive Policies, Capital Mobility and Tax Competition in Open Economies
AbstractThis paper investigates the trade-off between growth and distribution in open economies. In closed economies redistribution seems to reduce growth. I show that in open economies tax competition leads redistributing (left-wing) governments to mimic 'right-wing' policies if capital mobility is very high. In the model 'right-wing' governments are strategically passive and just maximize GNP growth. For domestic left-wing governments it is shown that 'left-right' competition leads to more redistribution and lower GDP growth than 'lfet-left' competition. Efficiency differences allow for higher GDP growth and redistribution than one's opponent. Irrespective of efficiency differences 'left-wing' governments are shown to have higher GDP growth rates when competing with other 'left-wing' governments.
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Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number eco97/24.
Length: 53 pages
Date of creation: 1997
Date of revision:
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ECONOMIC GROWTH ; EFFICIENCY ; GAME THEORY ; INCOME DISTRIBUTION;
Find related papers by JEL classification:
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
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- Rehme, Günther, 2004.
"Redistribution and Economic Growth in Integrated Economies,"
Darmstadt Discussion Papers in Economics
21580, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
- Rehme, Gunther, 2006. "Redistribution and economic growth in integrated economies," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 392-408, June.
- Enrique G. Mendoza & Linda L. Tesar, 2003.
"Winners and Losers of Tax Competition in the European Union,"
NBER Working Papers
10051, National Bureau of Economic Research, Inc.
- Enrique G. Mendoza & Linda L. Tesar, 2004. "Winners and Losers of Tax Competition in the European Union," Working Papers 508, Research Seminar in International Economics, University of Michigan.
- Günther Rehme, 2007.
"Economic Growth and (Re-)Distributive Policies in a Non-cooperative World,"
Journal of Economics,
Springer, vol. 91(1), pages 1-40, May.
- Rehme, Günther, 2006. "Economic growth and (re-)distributive policies in a non-cooperative world," Darmstadt Discussion Papers in Economics 25541, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
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