Electoral Competition and Policy Feedback Effects
33 Pages Posted: 23 Mar 2012 Last revised: 18 Mar 2016
Date Written: March 17, 2016
Many government policies systematically influence citizens' acquisition of economic information. Since voters evaluate policy platforms in light of this information, these policy feedback effects can affect voters' long term policy preferences. We illustrate this logic in the context of government subsidies to property ownership. Using an extension of the Romer-Meltzer-Richard model with imperfect information about the economy, we show how subsidies to ownership of real estate -- such as mortgage interest deductions or discounted sales of public housing -- produce an electorate that is systematically less favorable to redistributive taxation. The resulting political complementarity between home subsidy and fiscal conservatism is consistent with several empirical regularities.
Keywords: Property Ownership, Policy Feedback Effects, Redistribution
JEL Classification: H00, D72, D78
Suggested Citation: Suggested Citation