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Economics and Politics: A Unifying Framework

Ramón E. López
Authors registered in the RePEc Author Service: Ramon Lopez ()

Working Papers from University of Chile, Department of Economics

Abstract: This paper deals with economic growth, distribution and politics. The principal feature of this paper, which distinguishes itself from most existing literature, is that it integrates economic growth and political equilibria into a unifying framework. We study the distribution of power between the owners of capital (“the capitalists†) and the owners of human capital (“the workers†) and its relationship with the fundamental economic variables including capital market imperfections, economic growth, and inequality. We then develop a new model of politico-economic equilibrium in which economic power constitutes a key linkage between politics and economics. We show that all the fundamental economic variables, including economic power distribution, are in fact dependent on political conditions. We show that the performance of the economy is likely to be cyclical because of cyclical behavior of political conditions and vice versa, political cycles are in part originating in economic cycles. The model provides unique testable predictions, some of which we illustrate using US political and economic data for the period 1885-2016.

Pages: 48 pages
Date: 2020-06
New Economics Papers: this item is included in nep-fdg and nep-gro
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