Distortionary Taxes and Economic Growth in a Political-Economy Model of a Creative Region

Amitrajeet Batabyal and Hamid Beladi

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze a stylized creative region populated by three groups of individuals: the elites who hold political and taxing power, the entrepreneurial creative class that produces a knowledge good, and workers. Political competition between the elites and the creative class results in the elites levying distortionary taxes on the creative class. We provide a rationale for this kind of taxation and then present two results. First, we demonstrate that this kind of distortionary taxation reduces the equilibrium growth rate of the economy of our creative region. Second, we explain why this negative result arises.

Keywords: Creative Class; Distortionary Tax; Elite; Political Competition (search for similar items in EconPapers)
JEL-codes: H21 R11 (search for similar items in EconPapers)
Date: 2024-11-15, Revised 2025-02-07
New Economics Papers: this item is included in nep-ent, nep-geo, nep-pbe and nep-pol
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