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Fiscal transfers and distributive conflict in a simple endogenous growth model with unemployment

Author

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  • Luigi Bonatti

    () (Department of Economics, University of Bergamo)

Abstract

In the simplified formal treatment proposed in this paper, a decrease in a policy parameter the ratio of total tax revenues to GDP can monotonically increase long-term growth rate and may lead to a higher employment level. This notwithstanding, the paper shows that the redistributive implications of such a decrease may induce the wage earners to oppose it. As a consequence, policy makers reflecting social preferences may undertake redistributive transfers generating persistent unemployment and lowering growth even if commitment technologies allowing them to follow pre-announced tax policies were feasible.

Suggested Citation

  • Luigi Bonatti, 2004. "Fiscal transfers and distributive conflict in a simple endogenous growth model with unemployment," Working Papers (-2012) 0401, University of Bergamo, Department of Economics.
  • Handle: RePEc:brg:wpaper:0401
    as

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    References listed on IDEAS

    as
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    6. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
    7. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
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    More about this item

    Keywords

    endogenous growth; tax burden; welfare reforms; capital-labor conflict; politico-economic models;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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