Political Economy of Redistribution

44 Pages Posted: 24 May 2016

Multiple version iconThere are 2 versions of this paper

Date Written: May 2016

Abstract

It is often argued that additional constraints on redistribution such as granting veto power to more players in the society makes property better protected from expropriation. We use a legislative bargaining-type model 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 rights 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: institutions, legislative bargaining, political economy, Property rights

JEL Classification: D72, D74, P48

Suggested Citation

Diermeier, Daniel and Egorov, Georgy and Sonin, Konstantin, Political Economy of Redistribution (May 2016). CEPR Discussion Paper No. DP11285. Available at SSRN: https://ssrn.com/abstract=2783285

Daniel Diermeier (Contact Author)

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

University of Chicago - Harris Public Policy ( 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)

London
United Kingdom

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