Fiscal transfers and distributive conflict in a simple endogenous growth model with unemployment

Luigi Bonatti ()
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Luigi Bonatti: Department of Economics, University of Bergamo

No 401, Working Papers (-2012) from University of Bergamo, Department of Economics

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 pre-announced tax policies were feasible.

Keywords: endogenous growth; tax burden; welfare reforms; capital-labor conflict; politico-economic models (search for similar items in EconPapers)
JEL-codes: E25 H20 I38 O41 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004-08
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