Macroeconomic Policy and Distributional Conflict
Sunday, Jan. 8, 2017 10:15 AM – 12:15 PM
Swissotel Chicago, Monte Rosa
- Chair: Markus Schneider, University of Denver
Distributive Conflict, Growth, and the Entrepreneurial State
AbstractIn this paper, we introduce a twofold role for the public sector in the Goodwin (1967) growth cycle model. The government collects income taxes in order to: (a) invest in infrastructure capital, which directly aﬀects the production possibilities of the economy; (b) invest in publicly funded research, which augments labor productivity growth. We ﬁrst focus on a special case in which labor productivity growth depends entirely on public research, and show that: (i) there exists a tax rate that maximizes the long-run labor share, but not a growth-maximizing tax rate; (ii) the long-run labor share is always increasing in the share of public spending in infrastructure, and (iii) the presence of public R&D is not enough to stabilize the distributive conﬂict. We then study a more general model with induced technical change where, as is well known in the literature, the distributive conﬂict is resolved in the long run. With induced technical change: (iv) the labor share-maximizing tax rate is the same as in the special case; (v) the long-run share of labor is always increasing in the share of public spending in infrastructure, and (vi) maximizing growth requires to levy a tax rate in excess of the labor-share maximizing value.
Wealth Concentration, Income Distribution, and Alternatives for the United States
AbstractUS household wealth concentration is not likely to decline in response to fiscal interventions alone. Creation of an independent public wealth fund could lead to greater equality. Similarly, once-off tax/transfer packages or wage increases will not reduce income inequality significantly; on-going wage increases in excess of productivity growth would be needed. These results come from the accounting in a simulation model based on national income and financial data. The theory behind the model borrows from ideas that originated in Cambridge UK (especially from Luigi Pasinetti and Richard Goodwin).
University of Missouri-Kansas City
University of Oklahoma
Kadir Has University
- E1 - General Aggregative Models