47 Pages Posted: 17 Nov 2009
Date Written: October 2009
The paper presents evidence of an upward ratchet in transfers and taxes in the U.S. around World-War II. This finding is explained within a political-economy framework involving an executive who sets defense spending and the median voter in the population who interacts with a (richer) agenda setter in Congress in setting redistribution. While the setter managed to cap redistribution in the pre-war period, the War itself pushed up the status-quo tax burden, raising the bargaining power of the median voter as defense spending receded. This raised the equilibrium level of redistribution. The higher share of post-War transfers may thus be interpreted as a delayed fulfilment of a, not fully satisfied, popular demand for redistribution inherited from the Great Depression.
Keywords: agenda setter, ratchets, redistribution, taxes, transfers, World-War II
JEL Classification: E62, E65, N11, N12
Suggested Citation: Suggested Citation
Beetsma, Roel M. W. J. and Cukierman, Alex and Giuliodori, Massimo, The Political Economy of Redistribution in the U.S. In the Aftermath of World War II and the Delayed Impacts of the Great Depression - Evidence and Theory (October 2009). CEPR Discussion Paper No. DP7501. Available at SSRN: https://ssrn.com/abstract=1507498
By Dani Rodrik
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File name: DP7501.
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