Fiscal policy, growth, income distribution and sociopolitical instability

Javier Alcántar-Toledo and Yannis P. Venieris

European Journal of Political Economy, 2014, vol. 34, issue C, 315-331

Abstract: This paper identifies the fiscal instruments that governments can use to promote economic growth when sociopolitical instability (SPI) is present. We show that fiscal policy that takes into account income distribution and SPI transforms a neoclassical growth model into one with both endogenous growth and a poverty trap. Under these circumstances, the growth rate of the economy depends upon SPI, fiscal policy and income distribution. The baseline level of SPI determines an economy's ability to grow. If SPI is high, the economy remains in a poverty trap even if fiscal policy instruments are set appropriately.

Keywords: Economic growth; Fiscal policy; Sociopolitical instability; Poverty traps; Income distribution (search for similar items in EconPapers)
JEL-codes: O11 O23 O47 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:34:y:2014:i:c:p:315-331

DOI: 10.1016/j.ejpoleco.2014.03.002

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