Democratic governments, economic growth and income distribution

That in democracies more inequality leads to more redistribution is an implication of Allan Meltzer and Scott Richard's well-known model ( 1981).1 That, in turn, more redistribution leads to less growth is a generally accepted proposition. That "inequality is harmful for growth" (Persson and Tabellini, 1994) is thus the predictable result of the introduction of policy-making à la Meltzer and Richard into the theory of growth. The small literature in which such introduction has been attempted includes contributions by Alberto Alesina, Giuseppe Bertola, Roberto Perotti, Thomsten Persson, Dani Rodrik, Gilles Saint- Paul, Guido Tabellini and Thierry Verdier. Short surveys are provided by Perotti (1992), Persson and Tabellini (1992b) and Verdier (1994). The proposition that inequality of income or wealth, measured at one point of time, has a negative influence on subsequent growth is derived by all these authors with the exception of Saint-Paul and Verdier (1993), and some empirical support for it is displayed in Alesina and Rodrik (1992, 1994) and in Persson and Tabellini (1992a, 1994).