The political economy of growth and distribution: A theoretical critique

Stefan Dietrich Josten and Achim Truger

No 111, WSI Working Papers from The Institute of Economic and Social Research (WSI), Hans Böckler Foundation

Abstract: This paper reconsiders the political economy approach to growth and distribution according to which (1) rising inequality induces more government redistribution; (2) more government redistribution is financed by higher distortionary taxation; and (3) higher distortionary taxes reduce economic growth. We present a variety of theoretical arguments demonstrating that all three propositions may be overturned by simply changing an assumption in a plausible way or adding a relevant real-world element to the basal models. The political economy models of growth and distribution, as well as the specific inequality-growth transmission channel they propose, must therefore be assessed as overly simplistic and inadequate with respect to the issues studied.

Keywords: Political Economy; Redistribution; Inequality; Economic growth (search for similar items in EconPapers)
JEL-codes: D3 D72 H2 O4 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wsidps:111

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