Why Hasn’t Democracy Slowed Rising Inequality?

Journal of Economic Perspectives Volume 27, Number 3, Summer 2013, Pages 103-124

22 Pages Posted: 14 May 2019

See all articles by Adam Bonica

Adam Bonica

Stanford University

Nolan McCarty

Princeton University - Woodrow Wilson School of Public and International Affairs; Princeton University - Department of Political Science

Keith T. Poole

University of Georgia - School of Public and International Affairs

Howard Rosenthal

New York University (NYU) - Wilf Family Department of Politics

Date Written: 2013

Abstract

During the past two generations, democratic forms have coexisted with massive increases in economic inequality in the United States and many other advanced democracies. Moreover, these new inequalities have primarily benefited the top 1 percent and even the top .01 percent. These groups seem sufficiently small that economic inequality could be held in check by political equality in the form of “one person, one vote.” Indeed, the notion that inequality should be at least partially self-correcting in a democracy has a long pedigree in economic theory. In the canonical model of Meltzer and Richard (1981), increased inequality (in the form of median incomes falling relative to average incomes) leads the median voter to demand more redistribution, so that politics should limit after-tax and -transfer inequality. Redistribution is limited, however, by the consequences of how the higher rates of taxation reduce labor supply. A stripped-down version of this model, with similar implications, is the model developed by Bolton and Roland (1999), where redistribution is limited through deadweight loss in taxation. These early approaches (see also Romer 1975) assume that politics is majoritarian, equal (one person, one vote) and with full participation (all economic agents vote).

Keywords: democracy, inequality

Suggested Citation

Bonica, Adam and McCarty, Nolan and Poole, Keith T. and Rosenthal, Howard, Why Hasn’t Democracy Slowed Rising Inequality? (2013). Journal of Economic Perspectives Volume 27, Number 3, Summer 2013, Pages 103-124. Available at SSRN: https://ssrn.com/abstract=3375681 or http://dx.doi.org/10.2139/ssrn.3375681

Adam Bonica

Stanford University ( email )

Stanford, CA 94305
United States

Nolan McCarty

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Princeton University - Department of Political Science ( email )

Corwin Hall
Princeton, NJ 08544-1013
United States
(609) 258-1862 (Phone)
(609) 258-2809 (Fax)

Keith T. Poole (Contact Author)

University of Georgia - School of Public and International Affairs ( email )

Baldwin Hall
Athens, GA 30602-6254
United States

Howard Rosenthal

New York University (NYU) - Wilf Family Department of Politics ( email )

715 Broadway
New York, NY 10003
United States

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