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Title:Inequality, politics and economic growth PDF Logo
Authors:Chakrabarty, Debajyoti
Issue Date:2002
Series/Report no.:ZEI working paper B 28-2002
Abstract: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.
Subjects:Endogenous growth
Infrastructure
Nonrival input
Welfare
Political equilibrium
JEL:O41
H54
H41
D61
Document Type:Working Paper
Appears in Collections:ZEI Working Papers, Zentrum für Europäische Integrationsforschung, Universität Bonn

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