Edited by Neri Salvadori and Arrigo Opocher
Chapter 16: Political and Economic Interaction: Income Distribution and Economic Growth
Francesco Purificato 16.1. INTRODUCTION The political system and the economic system continuously interact over time. While economic interests emerge to acquire political influence in the policymaker’s decisional process, political decisions influence the economy and the balance of forces among economic interests. The interaction process can be defined as circular: the economic system influences the political one by originating interests able to exert pressure, and the political system affects the economic one by bringing about economic change (see Dixit, 1996). Since the seminal contribution by Buchanan and Tullock (1962), a wide strand of literature has focused on interest groups and their pressure as the institutional manifestation of economic interests in the political system. The interest group is a collective agent exerting pressure to promote an interest; pressure is political influence, which depends on resources used to support specific policies or particular candidates, and manage the exchange of strategic information (see Olson, 1965; Mitchell and Munger, 1991; and van Winden, 1999, 2003). In the interaction process between the political and economic system, the role of economic interests connected with single industrial sectors has been broadly analysed. An interesting issue is the relationship between pressure for promoting an economic interest and economic growth. This issue has been amply discussed since the seminal work by Olson (1982), where pressure slows down growth by promoting particular interests against general interests, that is, by promoting restricted markets against competitive markets. Within endogenous growth models, Olson’s view has been elaborated by Pecorino (1992), Rama (1993), Tornell and...