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Rat race, redistribution, and growth

Cozzi, G.

Authors

G. Cozzi



Abstract

Introducing locally negatively interdependent preferences into a simple AK growth model easily explains the often observed insignificant or positive correlation between distortionary redistribution and growth rates. Positive capital income taxes and lump sum transfers are harmful for growth, but people rationally vote for them in order to reduce “rat race” overaccumulation. A “neutrality proposition” holds if the pivotal voter is the mean voter, as in a representative agent case, but it fails if the pivotal voter is poorer than the average citizen.

Citation

Cozzi, G. (2004). Rat race, redistribution, and growth. Review of Economic Dynamics, 7(4), 900-915. https://doi.org/10.1016/j.red.2004.05.002

Journal Article Type Article
Publication Date Oct 1, 2004
Deposit Date Mar 2, 2010
Journal Review of Economic Dynamics
Print ISSN 1094-2025
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 7
Issue 4
Pages 900-915
DOI https://doi.org/10.1016/j.red.2004.05.002
Public URL https://durham-repository.worktribe.com/output/1522077