Economic growth and (re-)distributive policies in a non-cooperative world

Günther Rehme

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: Many models show that redistribution is bad for growth. This paper argues that in a non-cooperative world optimizing, redistributing (’left-wing’) governments mimic non-redistributing (’right-wing’) policies for fear of capital loss if capital markets become highly integrated and the countries are technologically similar. ’Left-right’ competition leads to more redistribution and lower GDP growth than ’left-left’ competition. Efficiency differences allow for higher GDP growth and more redistribution than one’s opponent. Irrespective of efficiency differences, however, ’left-wing’ governments have higher GDP growth when competing with other ’left-wing’ governments. The results may explain why one observes a positive correlation between redistribution and growth across countries, and why capital inflows and current account deficits may be good for relatively high growth.

Date: 2008
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Published in Darmstadt Discussion Papers in Economics . 175 (2008)

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Related works:
Journal Article: Economic Growth and (Re-)Distributive Policies in a Non-cooperative World (2007)
Working Paper: Economic Growth and (Re-)Distributive Policies in a Non-Cooperative World (2007)
Working Paper: Economic growth and (re-)distributive policies in a non-cooperative world (2006)
Working Paper: Economic growth and (re-)distributive policies in a non-cooperative world (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:77381

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