Income Distribution, Redistributive Politics, and Economic Growth
This article studies the political economy of inequality and growth by combining the political economy approach with an imperfect capital market assumption. In the present model, there emerges a class of individuals whose members do not invest privately beyond the state-financed schooling, due to their initial wealth constraint. We show that inequality affects private investment not only through the political effect, which relates inequality to private investment negatively, but also through what we call the threshold effect, which associates inequality to private investment positively. In general, private investment and inequality do not show a monotone negative relationship. Copyright 1998 by Kluwer Academic Publishers
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- Saint-Paul, Gilles & Verdier, Thierry, 1993.
"Education, democracy and growth,"
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- Perotti, Roberto, 1994. "Income distribution and investment," European Economic Review, Elsevier, vol. 38(3-4), pages 827-835, April.
- Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
- Galor, Oded & Zeira, Joseph, 1988.
"Income Distribution and Macroeconomics,"
51644, University Library of Munich, Germany, revised 01 Sep 1989.
- Verdier, Thierry, 1994. "Models of political economy of growth: A short survey," European Economic Review, Elsevier, vol. 38(3-4), pages 757-763, April.
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