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Economic growth and (re-)distributive policies in a non-cooperative world

Rehme, Günther (2006):
Economic growth and (re-)distributive policies in a non-cooperative world.
Darmstadt, In: Darmstadt Discussion Papers in Economics, [Online-Edition: http://econstor.eu/bitstream/10419/32095/1/516794493.PDF],
[Report]

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.

Item Type: Report
Erschienen: 2006
Creators: Rehme, Günther
Title: Economic growth and (re-)distributive policies in a non-cooperative world
Language: English
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.

Series Name: Darmstadt Discussion Papers in Economics
Volume: 175
Place of Publication: Darmstadt
Uncontrolled Keywords: Growth, Distribution, Tax Competition, Capital Mobility
Divisions: 01 Department of Law and Economics
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete
01 Department of Law and Economics > Volkswirtschaftliche Fachgebiete > Economic Theory
Date Deposited: 20 Nov 2008 08:22
Official URL: http://econstor.eu/bitstream/10419/32095/1/516794493.PDF
Additional Information:

JEL classification: O4, H21, D33, C72, F21

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