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Political Economy of Redistribution

42 Pages Posted: 18 Sep 2013 Last revised: 6 Nov 2016

Daniel Diermeier

Northwestern University - Kellogg School of Management

Georgy Egorov

Northwestern University - Kellogg School of Management; NBER

Konstantin Sonin

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; Higher School of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2016

Abstract

It is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation. We use a model of multilateral bargaining to demonstrate that this intuition may be flawed. Increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property protection. One is formal constraints that allow individuals or groups to block any redistribution that is not in their favor. The other occurs in equilibrium where players without such powers protect each other from redistribution. Players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. In a stable allocation, the society exhibits a "class" structure with class members having equal wealth and strategically protecting each other from redistribution.

Keywords: political economy, legislative bargaining, property rights, institutions

JEL Classification: D71, D74, C71

Suggested Citation

Diermeier, Daniel and Egorov, Georgy and Sonin, Konstantin, Political Economy of Redistribution (October 31, 2016). Available at SSRN: https://ssrn.com/abstract=2327412 or http://dx.doi.org/10.2139/ssrn.2327412

Daniel Diermeier

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Georgy Egorov

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Konstantin Sonin (Contact Author)

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Higher School of Economics ( email )

20 Myasnitskaya street
Moscow, 119017
Russia

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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