Trading and Voting
Rodney L. White Fin. Research Working Paper No. 22-00
15 Pages Posted: 12 Mar 2001
Date Written: January 16, 2001
The political choice between candidates with different redistribution policies plays out very differently in a complete financial market. When voters have the opportunity to trade election-contingent securities, we find that 1) wealth considerations have no effect on voting, so the interaction between candidates' redistribution policies and the distribution of wealth has no effect on who wins, 2) an election in which a candidate promises wealth redistribution results in redistribution of wealth, and the redistribution is the same regardless of who wins, and 3) if one candidate prefers some amount of redistribution and the other does not, the candidate who prefers redistribution will propose more redistribution than the amount he prefers.
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