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Do Welfare‐Maximizing Governments Cause Political Business Cycles in Growth and Inequality?
Author(s) -
Parker Simon C.
Publication year - 1999
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/1467-999x.00062
Subject(s) - economics , inequality , welfare , politics , government (linguistics) , social welfare , growth model , public economics , microeconomics , market economy , political science , law , mathematics , mathematical analysis , linguistics , philosophy
In this paper we study how an elected government maximizes social welfare over its period in office, subject to a growth–equality trade‐off. Optimal output and equality paths are derived and their implications are discussed. A central finding is the prediction of political business cycles in both growth and equality. It is also demonstrated that any tightening of the growth–equality trade‐off should encourage government to favour growth relative to equality.