Redistribution and the political support of free entry policy in the Schumpeterian model with heterogenous agents
AbstractWe consider the problem of finding sufficient conditions for political support of liberal, growth-enhancing policy in a quality-ladders model with heterogeneous agents differing in their endowment of wealth and skills. The policy set is two-dimensional: Agents vote for the level of redistribution as well as for the level of entry barriers preventing the creation of more efficient firms. We show that under the majority voting rule there are three possible stable political outcomes: full redistribution and low barriers to entry ("liberal" order), high redistribution and high barriers to entry ("corporatism"). We show that key variables determining the political outcome are the expected gain from technological adoption, the ratio of total profits to total wages, and the skewness of human capital distribution.
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Date of creation: May 2013
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Barriers to entry; majority voting; quality-ladders model; wealth inequality; talent inequality; economic growth;
Other versions of this item:
- Dmitry A. Veselov, 2013. "Redistribution and the political support of free entry policy in the Schumpeterian model with heterogenous agents," Documents de travail du Centre d'Economie de la Sorbonne 13050, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
- P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-16 (All new papers)
- NEP-CDM-2013-06-16 (Collective Decision-Making)
- NEP-POL-2013-06-16 (Positive Political Economics)
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