Divide and Rule: Redistribution in a Model with Differentiated Candidates
41 Pages Posted: 17 Mar 2016 Last revised: 27 Mar 2016
Date Written: March 14, 2016
We study an electoral competition model in which each voter is characterized by income level and non-economic characteristics, and where two vote share maximizing candidates, with fixed non-economic characteristics (differentiated candidates), strategically promise a level of redistribution. We prove existence of a unique Nash equilibrium which is characterized by policy convergence or divergence depending on whether candidates redistribution technologies are symmetric or not. Perhaps more importantly, we show that, independently of whether the equilibrium is convergent or divergent, there are three predominant effects on equilibrium tax rates: the group-size effect (the larger an income group, the larger its influence on equilibrium tax rate), the income effect (poor voters are more responsive to a redistributive transfer) and the within-group homogeneity effect (the degree to which voters of the same income group have similar non-economic characteristics). The latter drags redistribution towards the preferred level of redistribution of the less "divided" - in terms of non-economic characteristics - income group and may dominate over the other two.
Keywords: redistributive politics, inequality, taxation, differentiated candidates, within-group homogeneity, identity.
JEL Classification: D72, H20
Suggested Citation: Suggested Citation