Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/50470
Authors: 
Josten, Stefan Dietrich
Truger, Achim
Year of Publication: 
2003
Series/Report no.: 
WSI-Diskussionspapier 111
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.
Subjects: 
Political Economy
Redistribution
Inequality
Economic growth
JEL: 
D72
D3
H2
O4
Document Type: 
Working Paper

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