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Distributive Politics and Economic Growth

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  • Alberto Alesina
  • Dani Rodrik

Abstract

This paper studies the relationship between political conflict and economic growth in a simple model of endogenous growth with distributive conflicts. We study both the case of two "classes" (workers and capitalists) and the case of a continuum distribution of agents, characterized by different capital/labor shares. We establish several results concerning the relationship between the political influence of the two groups and the level of taxation, public investment, redistribution of income and growth. For example, it is shown that policies which maximize growth are optimal only for a government that cares only about the "capitalists." Also, we show that in a democracy (where the "median voter theorem' applies) the rate of taxation is higher and the rate of growth lower, the more unequal is the distribution of wealth We present empirical results consistent with these implications of the model.

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  • Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3668
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    1. Persson, Torsten & Tabellini, Guido, 1991. "Is Inequality Harmful for Growth? Theory and Evidence," CEPR Discussion Papers 581, C.E.P.R. Discussion Papers.
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    11. Terrones, M., 1990. "Influence Activities And Economic Growth," UWO Department of Economics Working Papers 9006, University of Western Ontario, Department of Economics.
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