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Distributive Politics and Economic Growth

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  • Alberto Alesina
  • Dani Rodrik

Abstract

This paper studies the relationship between political conflict and economic growth in a simple model of endogenous growth with distributive conflicts. We study both the case of two "classes" (workers and capitalists) and the case of a continuum distribution of agents, characterized by different capital/labor shares. We establish several results concerning the relationship between the political influence of the two groups and the level of taxation, public investment, redistribution of income and growth. For example, it is shown that policies which maximize growth are optimal only for a government that cares only about the "capitalists." Also, we show that in a democracy (where the "median voter theorem' applies) the rate of taxation is higher and the rate of growth lower, the more unequal is the distribution of wealth We present empirical results consistent with these implications of the model.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3668.

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Date of creation: Mar 1991
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Publication status: published as Quarterly Journal of Economics, forthcomgin 1994
Handle: RePEc:nbr:nberwo:3668

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  1. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
  2. Andrew Berg & Jeffrey Sachs, 1988. "The Debt Crisis: Structural Explanations of Country Performance," NBER Working Papers 2607, National Bureau of Economic Research, Inc.
  3. Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers, UCLA Department of Economics 539, UCLA Department of Economics.
  4. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  5. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, American Economic Association, vol. 74(5), pages 970-85, December.
  6. Mohtadi, Hamid & Roe, Terry L., 1991. "Political Economy of Endogenous Growth (Revised)," Bulletins, University of Minnesota, Economic Development Center 7502, University of Minnesota, Economic Development Center.
  7. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  8. Persson, Torsten & Tabellini, Guido, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 581, C.E.P.R. Discussion Papers.
  9. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, Elsevier, vol. 4(2), pages 163-185, February.
  10. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, Elsevier, vol. 8(3), pages 329-340, December.
  11. Fischer, Stanley, 1980. "Dynamic inconsistency, cooperation and the benevolent dissembling government," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 2(1), pages 93-107, May.
  12. repec:fth:coluec:595 is not listed on IDEAS
  13. Terrones, M., 1990. "Influence Activities And Economic Growth," UWO Department of Economics Working Papers, University of Western Ontario, Department of Economics 9006, University of Western Ontario, Department of Economics.
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