The political Economy of Wealth and Interest

Bibliographic Data

ID9711869
AuthorsHans Peter Grüner (Universität Mannheim and CEPR), Rüdiger Schils (RWE AG, Essen)
Year2007
Volume117
Issue523
Pages1403-1422
Publication date2007-10-01
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2007.02088.x
OpenAlexW2124594987
LanguageEN
Citations received2
References cited16

We study the relationship between wealth redistribution and the allocation of firm-ownership. The economy's wealth distribution affects the equilibrium interest rate and the allocation of entrepreneurial rents when wealth determines agents' ability to borrow. This leads to an unconventional voting behaviour of the politically decisive middle class: the political preferences of middle and upper class voters coincide when redistribution only has an adverse interest-rate effect. Middle class voters vote with the lower class if redistribution gives access to entrepreneurial rents. Technology may strongly affect political outcomes. Greater inequality amplifies the interest-rate effect and may lead to less redistribution. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007

Economic policy · Economics · Market economy · Political economy · Political science · Politics · Economic Theory and Policy · Housing, Finance, and Neoliberalism · State Capitalism and Financial Governance

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