Fiscal Transfers and Distributive Conflict in a Simple Endogenous Growth Model with Unemployment

Bonatti Luigi
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Bonatti Luigi: University of Trento,Trento TN, Italy

German Economic Review, 2007, vol. 8, issue 1, 41-63

Abstract: In the simplified formal treatment proposed in this paper, a decrease in a policy parameter - the ratio of total tax revenues to GDP - can monotonically increase long-term growth rate and may lead to a higher employment level. This notwithstanding, the paper shows that the redistributive implications of such a decrease may induce the wage earners to oppose it. As a consequence, policy-makers reflecting social preferences may undertake redistributive transfers generating persistent unemployment and lowering growth even if commitment technologies allowing them to follow preannounced tax policies were feasible.

Keywords: Capital-labor conflict; endogenous growth; politico-economic models; tax burden; welfare reforms (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1111/j.1468-0475.2007.00133.x

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