Redistribution and technology adoption under uncertainty : a political economy perspective

Chinzara, Zivanemoyo & Lahiri, Radhika (2013) Redistribution and technology adoption under uncertainty : a political economy perspective. In Aney, Madhav Shrihari, Huang, Fali, & Fujii, Tomoki (Eds.) 6th Australasian Public Choice Conference , 6-7 December 2013, Singapore Management University. (Unpublished)


We examine the role of politico-economic influences on macroeconomic performance within the framework of an endogenous growth model with costly technology adoption and uncertainty. The model is aimed at understanding the diversity in growth and inequality experiences across countries. Agents adopt either of two risky technologies, one of which is only available through financial intermediaries, who are able to alleviate some of this risk. The entry cost of financial intermediation depends on the proportion of government revenue that is allocated towards cost-reducing financial development expenditure, and agents vote on this proportion. The results show that agents at the top and bottom ends of the distribution prefer alternative means of re-distribution, thereby effectively blocking the allocation of resources towards cost-reducing financial development expenditure. Thus political factors have a role in delaying financial and capital deepening and economic development. Furthermore, the model provides a political-economy perspective on the Kuznets curve; uncertainty interacts with the political economy mechanism to produce transitional inequality patterns that, depending on initial conditions, can unearth the Kuznets-curve experience. Finally, the political outcomes are inefficient relative to policies aimed at maximizing the collective welfare of agents in the economy.

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ID Code: 65627
Item Type: Conference Paper
Refereed: Yes
Additional URLs:
Keywords: Economic Growth, Inequality, Political Economy, Technology Adoption, Redistribution
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2013 Please consult the authors
Deposited On: 03 Jan 2014 04:51
Last Modified: 03 Jan 2014 06:20

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