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Discussion Paper Details

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Title: Distributional Conflicts, Power and Multiple Growth Paths

Author(s): Gilles Saint-Paul and Thierry Verdier

Publication Date: February 1992

Keyword(s): Capital Flight, Distributional Conflict, Endogenous Growth and Political Equilibrium

Programme Area(s): International Macroeconomics

Abstract: This paper shows that multiple growth paths may occur in a politico-economic model of endogenous growth. This multiplicity is characterized by the coexistence of a low-tax, low-capital-flight equilibrium and a high-tax, high-capital-flight equilibrium. The likelihood of multiplicity is crucially related to the structure of power in society. For multiplicity to arise, it is necessary that the group in power (or the group that is decisive in determining the political outcome) has greater access to international capital markets than the average in the economy. The model provides an example of an inefficient allocation resulting from majority voting among rational agents.

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Bibliographic Reference

Saint-Paul, G and Verdier, T. 1992. 'Distributional Conflicts, Power and Multiple Growth Paths'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=633