Imperfect Information and the Meltzer - Richard Hypothesis

34 Pages Posted: 20 Nov 2010  

Christian Bredemeier

University of Dortmund - Ruhr Graduate School in Economics

Date Written: November 19, 2010

Abstract

Despite a strong theoretical prediction that income skewness and redistribution should be positively linked, empirical evidence on this issue is mixed. This paper argues that it is important to distinguish between sources of changes in income skewness. Two sources of such changes are discussed: rising polarization and upward mobility, which both increase income skewness. Under imperfect information, these developments affect redistribution in different ways. While rising polarization increases redistribution, upward mobility can have the opposite effect. Reasonable degrees of informational imperfection are sufficient to generate increasing income skewness and decreasing redistribution in the presence of upward mobility.

Keywords: Voting, Redistribution, Imperfect Information

JEL Classification: D72, H24, D83

Suggested Citation

Bredemeier, Christian, Imperfect Information and the Meltzer - Richard Hypothesis (November 19, 2010). Ruhr Economic Paper No. 213. Available at SSRN: https://ssrn.com/abstract=1711812 or http://dx.doi.org/10.2139/ssrn.1711812

Christian Bredemeier (Contact Author)

University of Dortmund - Ruhr Graduate School in Economics ( email )

Hohenzollernstr. 1-3
Essen, NRW 45128
Germany

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