Abstract
I study an economy where individuals have different initial endowments and fiscal policy is decided by majority voting. Public investment is financed by two flat rate taxes, one on labor income and the other one on capital income. The model shows a positive (negative) correlation between growth and the tax rate on labor (capital) income and a negative (positive) correlation between the tax rate on labor (capital) income and inequality. The results reconcile the theory with empirical evidence.
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