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Inequality, Politics and Economic Growth


  • Debajyoti Chakrabarty

    () (Rutgers University)


The paper studies the relationship between inequality and economic growth. This is done in a two sector model of endogenous growth with agents characterized by heterogeneity of factor endowments. The private sector consists of a large number of competitive firms who produce the only final good in the economy. This good is both consumable as well as accumulable. The government is seen to produce a productive factor interpreted as infrastructure. Infrastructure is both nonrival and accumulable. Infrastructural services flow into the production of infrastructural stocks as well as the final good. Capital used for infrastructural production is financed by the government by taxing capital income. The choice of the growth rate is determined by the tax rate on capital income. We study the choice of the economy's growth rate under a median voter democracy. The results show that inequality of the distribution of capital does not hamper growth.

Suggested Citation

  • Debajyoti Chakrabarty, 2000. "Inequality, Politics and Economic Growth," Departmental Working Papers 200019, Rutgers University, Department of Economics.
  • Handle: RePEc:rut:rutres:200019

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    References listed on IDEAS

    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-1198, December.
    2. Gary S. Becker & Kevin M. Murphy & Robert Tamura, 1994. "Human Capital, Fertility, and Economic Growth," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 323-350 National Bureau of Economic Research, Inc.
    3. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    4. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Görkemli Kazar & Altuð Kazar, 2015. "Is “Harmonious Development” Valid for European Union Regions?," International Journal of Economics and Financial Issues, Econjournals, vol. 5(4), pages 954-967.

    More about this item


    Endogenous growth;

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models


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