ECONOMIC DEVELOPMENT AND AGREEABLE REDISTRIBUTION IN CAPITALISM: EFFICIENT GAME EQUILIBRIA IN A TWO-CLASS NEOCLASSICAL GROWTH MODEL.

This paper presents redistributive taxation and economic growth as a noncooperative differential game in which the politically powerful poor (workers) control redistribution whereas the economically powerful rich (capitalists) control accumulation. Both groups are assumed to be interested in maximizing the sum of their own discounted consumption over an infinite horizon. The players use trigger strategies which permit the construction of threats designed to sustain cooperation as an equilibrium, The properties of the trigger strategies and the dependence of sustainable cooperative policies on the technology preferences and development history of the economy are discussed. [ABSTRACT FROM AUTHOR]