Political Equilibrium, Income Distribution, and Growth

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ID: 304383
1993
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Abstract
This paper analyzes the impact of income distribution on growth when investment in human capital is the source of growth and individuals vote over the degree of redistribution in the economy. The model has three main features. First, very different patterns of income distribution are conducive to high growth at different levels of per capita income. Second, growth is associated with an externality whereby investment in human capital by one group increases the productivity of other groups, thus potentially enabling them to invest in human capital. Third, the initial pattern of income distribution and the resulting political equilibrium are crucial in determining whether the transmission of this externality is promoted, in which case growth is enhanced, or prevented, in which case growth is stopped. Using a non-overlapping generations model with voting, I derive several empirical implications. In particular, the model implies an inverted-U relation between levels of inequality and levels of income in cross-sections, but not necessarily in time series, a result that seems consistent with a number of empirical studies.
Reference Key
openalex_W2006248141 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Roberto Perotti
Journal The Review of Economic Studies
Year 1993
DOI
10.2307/2298098
URL
https://doi.org/10.2307/2298098
Keywords Keywords not found

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