Inequality, politics and economic growth

Arbeitspapier

The paper studies the relationship between inequality and economic growth. This is done in a two sector model of endogenous growth with agents characterized by heterogeneity of factor endowments. The private sector consists of a large number of competitive ¯rms who produce the only ¯nal good in the economy. This good is both consumable as well as accumulable. The government is seen to produce a productive factor interpreted as infrastructure. Infrastructure is both nonrival and accumulable. Infrastructural services °ow into the production of infrastructural stocks as well as the ¯nal good. Capital used for infrastructural production is ¯nanced by the government by taxing capital income. The choice of the growth rate is determined by the tax rate on capital income. We study the choice of the economy's growth rate under a median voter democracy. The results show that inequality of the distribution of capital does not hamper growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEI Working Paper ; No. B 28-2002

Classification and Topics

• Classification: Wirtschaft ; One, Two, and Multisector Growth Models ; National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock ; Public Goods ; Allocative Efficiency; Cost-Benefit Analysis
• Subject: Endogenous growth ; Infrastructure ; Nonrival input ; Welfare ; Political equilibrium ; Neue Wachstumstheorie ; Infrastruktur ; Median Voter ; Einkommensverteilung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Chakrabarty, Debajyoti
• Event: Veröffentlichung
• (who): Rheinische Friedrich-Wilhelms-Universität Bonn, Zentrum für Europäische Integrationsforschung (ZEI)
• (where): Bonn
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/39484
• Last update: 10.03.2025, 11:45 AM CET