Economic growth and (re-)distributive policies in a non-cooperative world

Günther Rehme

No 175, Darmstadt Discussion Papers in Economics from Darmstadt University of Technology, Department of Law and Economics

Abstract: Many models show that redistribution is bad for growth. This paper argues that in a non-cooperative world optimizing, redistributing ('left-wing') governments mimic non-redistributing ('right-wing') policies for fear of capital loss if capital markets become highly integrated and the countries are technologically similar. 'Left-right' competition leads to more redistribution and lower GDP growth than 'left-left' competition. Efficiency differences allow for higher GDP growth and more redistribution than one's opponent. Irrespective of efficiency differences, however, 'left-wing' governments have higher GDP growth when competing with other 'left-wing' governments. The results may explain why one observes a positive correlation between redistribution and growth across countries, and why capital inflows and current account deficits may be good for relatively high growth.

Keywords: Growth; Distribution; Tax Competition; Capital Mobility (search for similar items in EconPapers)
JEL-codes: C72 D33 F21 H21 O4 (search for similar items in EconPapers)
Date: 2006
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Related works:
Working Paper: Economic growth and (re-)distributive policies in a non-cooperative world (2008)
Journal Article: Economic Growth and (Re-)Distributive Policies in a Non-cooperative World (2007)
Working Paper: Economic Growth and (Re-)Distributive Policies in a Non-Cooperative World (2007)
Working Paper: Economic growth and (re-)distributive policies in a non-cooperative world (2006)
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