The recent theorical literature on the political economy of growth displays contrasting findings on the nature of the political link between income inequality and growth. In this paper, we explain this contrast and argue that in a democracy, when redistribution is in the form of government expenditure on education, and government expenditure does not crowd out private expenditures by altruistic agents, a negative relation between inequality and growth emerges in equilibrium.
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Paper provided by Laval - Recherche en Politique Economique in its series Papers with number
9820.
Find related papers by JEL classification: O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General