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The political economy of growth and distribution: A theoretical critique

  • Josten, Stefan Dietrich
  • Truger, Achim

This paper reconsiders the political economy approach to growth and distribution according to which (1) rising inequality induces more government redistribution; (2) more government redistribution is financed by higher distortionary taxation; and (3) higher distortionary taxes reduce economic growth. We present a variety of theoretical arguments demonstrating that all three propositions may be overturned by simply changing an assumption in a plausible way or adding a relevant real-world element to the basal models. The political economy models of growth and distribution, as well as the specific inequality-growth transmission channel they propose, must therefore be assessed as overly simplistic and inadequate with respect to the issues studied.

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File URL: https://www.econstor.eu/bitstream/10419/50470/1/362976783.pdf
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Paper provided by The Institute of Economic and Social Research (WSI), Hans-Böckler-Foundation in its series WSI Working Papers with number 111.

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Date of creation: 2003
Handle: RePEc:zbw:wsidps:111
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