Distributional conflict in small open economies
Andreas Schäfer and
Thomas Steger ()
Research in Economics, 2013, vol. 67, issue 4, 355-367
We aim at a better understanding of the inefficiencies resulting from distributional conflict in small open economies. To this end, a general equilibrium model with the following characteristics is set up: two groups of agents (capitalists and workers), an endogenous income tax, productive government expenditures, social transfers, and an outside option for capital. The overall distributional-conflict inefficiency is decomposed into three components: (i) a fundamental time inconsistency problem; (ii) strategic interaction in the political process; (iii) heterogeneity among individuals and the resulting unavoidable conflict of interest. A numerical exercise (based on OECD data) indicates that the distributional-conflict inefficiency may cause a substantial output loss.
Keywords: Distributional conflict; Time inconsistency; Strategic interaction; Heterogeneity (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:reecon:v:67:y:2013:i:4:p:355-367
Access Statistics for this article
Research in Economics is currently edited by Federico Etro
More articles in Research in Economics from Elsevier
Bibliographic data for series maintained by Haili He ().