Growth, Income Distribution, and the “Entrepreneurial State”

A new working paper by Luca Zamparelli and yours truly just appeared on the New School for Social Research Department of Economics Working Paper Series. The goal of the paper is to analyze the role of the government as a provider of infrastructure capital as well as financing public R&D in an otherwise standard model of distributive conflict.

The main conclusions of the analysis are quite interesting, I think: under mild conditions on relevant elasticities (that appear to be satisfied for the United States) there exists a tax rate that maximizes the long-run labor share, and it is smaller than the growth-maximizing tax rate; (ii) the long-run share of labor is always increasing in the share of public spending in infrastructure; (iii) different taxation schemes have an impact on the stability of growth cycles. Post-war US data appear to confirm the direct correlation between the infrastructure share and the labor share that results from our model.

Read the paper here.

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