Autore
Rehme, Gunther

Titolo
Why are thè data at odds with theory? Growth and (Re-)Distributive Policies in integrated economies
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1999 - Fascicolo: 43 - Pagina iniziale: 1 - Pagina finale: 29

Many theoretical models show that redistribution causes low growth. However, cross-country regressions often suggest that growth is posi-tively related to redistribution. This paper analyzes that puzzle in an open economy framework. Among other things it is shown that tax competition and thè danger of capitai outflows leads optimizing, redis-tributing governments to pursue high growth, no redistribution policies in technologically similar economies. However, if a redistributing gov-ernment's economy is technologically superior, it is shown that it may attract foreign owned capitai, have relatively higher GDP growth and may redistribute. Both resulta imply that in a cross-section of countries one would observe a positive association between growth and redistributive transfers.




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