DISTRIBUTIVE POLITICS AND ECONOMIC-GROWTH

We study the relationship between politics and economic growth in a si mple model of endogenous growth with distributive conflict among agent s endowed with varying capital/labor shares. We establish several resu lts regarding the factor ownership of the median individual and the le vel of taxation, redistribution, and growth. Policies that maximize gr owth are optimal only for a government that cares solely about pure '' capitalists.'' The greater the inequality of wealth and income, the hi gher the rate of taxation, and the lower growth. We present empirical results that show that inequality in land and income ownership is nega tively correlated with subsequent economic growth.