Heavy investment and high pollution as rational choices under socialism

Abstract

This paper attempts a rational explanation of the big stylized facts that were the hallmark of the socialist economies: high investment rates, high levels of environmental depletion and defense expenditure. In contrast to the dominant approach in comparative economics, which relies on bureaucratic and/or political preferences, a simple median-voter model yields this structure of national output as the utility-maximizing choice of a decisive voter faced with a redistribution of income that takes the form of collectivization of capital accumulation, whose burden is borne more than proportionally by higher-income groups. This basic model is then extended to deal with different specifications of the political process, different degrees of centralization of decision-making, and the territorial dimension of redistribution.