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Redistribution and economic growth in integrated economies


  • Rehme, Gunther


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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Suggested Citation

  • Rehme, Gunther, 2006. "Redistribution and economic growth in integrated economies," Journal of Macroeconomics, Elsevier, vol. 28(2), pages 392-408, June.
  • Handle: RePEc:eee:jmacro:v:28:y:2006:i:2:p:392-408

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    Cited by:

    1. Günther Rehme, 2011. "Endogenous Policy And Cross‐Country Growth Empirics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 262-296, May.
    2. Rehme, Günther, 2014. "Endogenous (re-)distributive policies and economic growth: A comparative static analysis," Economic Modelling, Elsevier, vol. 40(C), pages 355-366.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation


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