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Redistribution and Economic Growth in Integrated Economics

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Author Info
Günther Rehme () (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))

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Abstract

Many theoretical models show that redistribution causes low growth or capital outflows even though empirically redistribution and growth are often found to be positively associated across countries. This paper argues that tax competition and the danger of capital outflows leads optimizing governments to pursue high growth, no redistribution policies in technologically similar economies. However, the government of a technologically superior economy may attract foreign and domestically owned capital and may have relatively higher GDP growth and more resources for redistribution than in a closed economy. Thus, redistributing governments may have a relatively stronger interest in technological advance or high economic integration. The results imply that one may well observe a positive association between redistribution and growth across countries.

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Publisher Info
Paper provided by Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology) in its series Darmstadt Discussion Papers in Economics with number 141.

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Length: 30 pages
Date of creation: Aug 2004
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Handle: RePEc:tud:ddpiec:141

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Related research
Keywords: Growth; Redistribution; Tax Competition; Capital Mobility;

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Find related papers by JEL classification:
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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