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Inequality, Politics, and Economic Growth. Three Critical Questions on Politico-Economic Models on Growth and Distribution

Author

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  • Josten, Stefan Dietrich

    (Helmut Schmidt University, Hamburg)

  • Truger, Achim

    (Hans-Boeckler-Stiftung)

Abstract

This paper questions the three standard propositions used by politico-economic models of 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 basic models. The politico-economic 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.

Suggested Citation

  • Josten, Stefan Dietrich & Truger, Achim, 2003. "Inequality, Politics, and Economic Growth. Three Critical Questions on Politico-Economic Models on Growth and Distribution," Working Paper 3/2003, Helmut Schmidt University, Hamburg.
    • Handle: RePEc:ris:vhsuwp:2003_003
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    Citations

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    Cited by:

    1. Thompson Jeffrey P. & Leight Elias, 2012. "Do Rising Top Income Shares Affect the Incomes or Earnings of Low and Middle-Income Families?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-38, November.
    2. Martin Baur, 2010. "Politics and Income Distribution," Chapters, in: Neri Salvadori (ed.), Institutional and Social Dynamics of Growth and Distribution, chapter 3, Edward Elgar Publishing.

    More about this item

    Keywords

    Political Economy; Redistribution; Inequality; Economic growth;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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