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Endogenous Redistributive Cycles

Author

Listed:
  • Maik Heinemann
  • Christiane Clemens

Abstract

This paper discusses the emergence of endogenous redistributive cycles in a stochastic growth model with incomplete asset markets and heterogeneous agents, where agents vote on the degree of progressivity in the tax-transfer-scheme. We develop two models, the first being highly-stylized, where redistributive cycles occur in a simple majority voting process due to counter-acting effects from inequality aversion and prospects of upward mobility. The second model draws from Benabou (1996) and ties the bias in the distribution of political power to the degree of inequality in the society, thereby triggering redistributive cycles which then give rise to a nonlinear, cyclical pattern of growth and savings rates over time

Suggested Citation

  • Maik Heinemann & Christiane Clemens, 2004. "Endogenous Redistributive Cycles," Computing in Economics and Finance 2004 265, Society for Computational Economics.
    • Handle: RePEc:sce:scecf4:265
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    More about this item

    Keywords

    Income inequality; political-economic equilibrium; redistribution; Hopf bifurcation;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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