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Investments in human capital accumulation, government consumption and total government expenditures present a striking negative correlation with capital shares. This correlation is robust to alternative specifications, lists of controls, and exclusion of outliers. Causality tests strongly support the hypothesis that the direction of causation runs from capital shares to the government spending variables. We present a political economy model of interest groups that can account for these correlations. In contrast, a median voter model predicts positive correlations between capital shares and the government spending variables.

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... Despite the overarching effect of income inequality on economic growth, empirical studies investigating the channels of transmission of its effect on economic growth are sparse. Persson and Tabellini [1994], Alesina and Perotti [1996], Perotti [1996], Deininger and Squire [1998], Deininger and Olinto [2000], Barro [2000], Sylwester [2000], Pineda and Rodríguez [2006], Cingano [2014], and Grundler and Scheuermeyer [2018] have assessed the relevance and validity of savings, credit market imperfection, fiscal policy (political economy), fertility differentials, and the sociopolitical channels via which income inequality exerts its effects on economic growth. Deininger and Squire [1998] confirm, for a panel of 81 countries, credit market imperfections as the channel through which income inequality negatively affects economic growth. ...
... The coefficient of the Gini index becomes statistically significant in the growth model after the inclusion of the measure of fiscal policy. These results confirm the transmission of the effect of income inequality on growth through this channel and corroborate the findings of Persson and Tabellini [1994], Deininger and Squire [1998], and Pineda and Rodríguez [2006]. This is also consistent with the studies of Perotti [1996], Barro [2000], and Bagchi and Svejnar [2015]. ...
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... The independent variables are the logarithm of population ( Pop), the logarithm of population density ( Dens), the 'average years of schooling (alternatively primary and secondary) attained in the year 1970' ( _ ℎ_70 ) taken from Barro and Lee (2001) and a vector containing a number of control variables. The use of a lagged value for the variable _ ℎ_70 aims at avoiding the problems produced by the potential endogeneity of this variable; see Pineda and Rodríguez (2006) and De la Croix and Doepke (2009). The first control variable is the 5-year lag of the logarithm of the real GDP per capita ( GDPpc_5) -to contemplate for the famous Kuznets (1955) hypothesis of a u-shape relationship income inequality and economic development measure by the GDP per capita. ...
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... For example, the United Kingdom and the United States feature higher wage inequality and smaller redistribution whereas some Continental European and Nordic countries display lower wage inequality and larger redistribution. In fact, Pineda and Rodriguez (2006) found a strong negative correlation between redistribution and the share of capital in GDP where the share is considered an indicator of income inequality. ...
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This paper studies the impact of lobbying on political competition and policy outcomes in a framework which integrates the citizen-candidate model of representative democracy with the menu-auction model of lobbying. Positive and normative issues are analysed. On the positive side, lobbying need have little or no effect on policy outcomes because voters can restrict the influence of lobbyists by supporting candidates with offsetting policy preferences. On the normative side, coordination failure among lobbyists can result in Pareto inefficient policy choices. In addition, by creating rents to holding office, lobbying can lead to “excessive” entry into electoral competition.
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