Growing Into and Out of Social Conflict

We develop a model of growth and distributional conflict which demonstrates that social tensions may peak at an intermediate development stage. In fact, unless the economy is caught in an underdevelopment trap, the relationship between average wealth and the likelihood of radical redistribution tends to be hump–shaped: while the net benefits of redistribution for the poor are small at low development stages, moving towards egalitarianism considerably improves their income prospects once an intermediate level of per capita wealth is reached. As the economy grows further, the incentive to challenge the existing social order decreases again and eventually vanishes.