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Rat Race, Redistribution, and Growth

  • Guido Cozzi

    (University of Rome La Sapienza)

Introducing locally negatively interdependent preferences into a simple AK growth model easily explains the often observed insignificant or positive correlation between distortionary redistribution and growth rates. Positive capital income taxes and lump sum transfers are harmful for growth, but people rationally vote for them in order to reduce "rat race" overaccumulation. A "neutrality proposition" holds if the pivotal voter is the mean voter, as in a representative agent case, but it fails if the pivotal voter is poorer than the average citizens. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2004.05.002
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 7 (2004)
Issue (Month): 4 (October)
Pages: 900-915

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Handle: RePEc:red:issued:v:7:y:2004:i:4:p:900-915
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