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Corresponding Author:
Andrea Vindigni, DISPI, Department of Political Sciences, University of Genova, Italy

Factor Shares, Redistribution and Growth in a Captured Democracy

March 22, 2024
JEL classification: O11;O43
Keywords: Political Economy; Government; Inequality; Economic Growth; Redistribution; Lobbying

Abstract

In this paper, an endogenous growth model is presented, based on productive public expenditure and on a certain degree of inequality in the distribution of income, and of polarization in citizens’ preferences concerning economic policy. The main innovation of this contribution consists in the political process that determines capital taxation, a process based on an “influence activity” exercised by the minoritarian capitalist class with the goal of capturing some political power from the majority of the citizens. In particular, lobbying activities investments, allow the capitalists to obtain a gradually lower level of capital taxation, to the benefit of themselves and of economic growth. Capital accumulation leads by the same token to an increment in lobbying activity, in order to convince the government to implement still a lower level of capital stock taxation, and more and more close to the preferences of the capitalists. In conclusion, it is demonstrated that in the long run, the full convergence obtains towards a political realm totally dominated by the few capitalists’ de facto power, or to a political-economic reality similar to an “oligarchic technocracy” or to a “plutocracy.”

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Factor Shares, Redistribution and Growth in a Captured Democracy

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Institute for International Economics of the Genoa Chamber of Commerce

Institute for International Economics
of the Genoa Chamber of Commerce