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Wealth Inequality, Income Redistribution and Growth in 15 OECD countries

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  • Sonedda, Daniela

    (University of Piemonte Orientale)

Abstract

We model the individuals' investment in physical capital and education decisions in presence of borrowing constraints and a progressive taxation system. Our empirical evidence for 15 OECD countries supports the theoretical model predictions according to which the effects on growth of higher redistribution are ambiguous. We find that in those countries characterized by a high (low) taxation level and a high (low) degree of tax progressivity, further redistribution has a negative (positive) impact on growth since the disincentive effects on individuals' effort prevail (is dominated by) the positive effect of allowing more people to have access to the capital market.

Suggested Citation

  • Sonedda, Daniela, 2003. "Wealth Inequality, Income Redistribution and Growth in 15 OECD countries," Royal Economic Society Annual Conference 2003 190, Royal Economic Society.
  • Handle: RePEc:ecj:ac2003:190
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    Cited by:

    1. N. Gobbin & G. Rayp, 2004. "Inequality and Growth: Does Time Change Anything?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/230, Ghent University, Faculty of Economics and Business Administration.

    More about this item

    Keywords

    growth; income distribution; progressive taxation;

    JEL classification:

    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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