Growth, Learning and Redistributive Policies
This paper develops an endogenous growth model with redistributive
taxation in which the growth rate of the economy affects the agents' preferences
over redistributive policies, and therefore, the equilibrium level of taxation.
The main mechanism through which the growth rate affects policy preferences
is by changing the ability of the agents to learn their positions in the
future distribution of incomes. The main result of the paper is that during
periods of growth, the society opts for less taxation and less redistribution.
The model also predicts that growing economies are characterized by higher
inequality in the distribution of income and by greater mobility of agents
within income classes over time.