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Economic Growth and (Re-)Distributive Policies in a Non-cooperative World

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  • Günther Rehme
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.
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  • Günther Rehme, 2007. "Economic Growth and (Re-)Distributive Policies in a Non-cooperative World," Journal of Economics, Springer, vol. 91(1), pages 1-40, May.
    • Handle: RePEc:kap:jeczfn:v:91:y:2007:i:1:p:1-40
    DOI: 10.1007/s00712-006-0226-2
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    Cited by:

    1. Rehme, Günther, 2014. "Endogenous (re-)distributive policies and economic growth: A comparative static analysis," Economic Modelling, Elsevier, vol. 40(C), pages 355-366.
    2. Ushakov Denis & Natalia Bandurina & Sergey Shkodinsky, 2017. "Country s Welfare as an Efficiency Factor in Fiscal Policy Promoting Economig Growth," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 13(2), pages 121-127.
    3. Toshiki Tamai, 2015. "Redistributive taxation, wealth distribution, and economic growth," Journal of Economics, Springer, vol. 115(2), pages 133-152, June.
    4. repec:mje:mjejnl:v:12:y:2017:i:2:p:121-127 is not listed on IDEAS

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    More about this item

    Keywords

    growth; distribution; tax competition; capital mobility; O4; H21; D33; C72; F21;
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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