The political Economy of Wealth and Interest

HansPeter Grüner and Rüdiger Schils

Economic Journal, 2007, vol. 117, issue 523, 1403-1422

Abstract: We study the relationship between wealth redistribution and the allocation of firm-ownership. The economy's wealth distribution affects the equilibrium interest rate and the allocation of entrepreneurial rents when wealth determines agents' ability to borrow. This leads to an unconventional voting behaviour of the politically decisive middle class: the political preferences of middle and upper class voters coincide when redistribution only has an adverse interest-rate effect. Middle class voters vote with the lower class if redistribution gives access to entrepreneurial rents. Technology may strongly affect political outcomes. Greater inequality amplifies the interest-rate effect and may lead to less redistribution. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:117:y:2007:i:523:p:1403-1422

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().