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The political economy of growth and distribution: A theoretical critique

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  • Josten, Stefan Dietrich
  • Truger, Achim
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    Abstract

    This paper reconsiders the political economy approach to growth and distribution according to which (1) rising inequality induces more government redistribution; (2) more government redistribution is financed by higher distortionary taxation; and (3) higher distortionary taxes reduce economic growth. We present a variety of theoretical arguments demonstrating that all three propositions may be overturned by simply changing an assumption in a plausible way or adding a relevant real-world element to the basal models. The political economy models of growth and distribution, as well as the specific inequality-growth transmission channel they propose, must therefore be assessed as overly simplistic and inadequate with respect to the issues studied. --

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    Bibliographic Info

    Paper provided by Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung in its series WSI Discussion Papers with number 111.

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    Date of creation: 2003
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    Handle: RePEc:zbw:wsidps:111

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    Related research

    Keywords: Political Economy; Redistribution; Inequality; Economic growth;

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