Ideology, Tactics, and Efficiency in Redistributive Politics
Center for Economic Studies Working Paper at University of Munich, Number 137
Posted: 1 May 1998
Date Written: June 1997
We model the electoral politics of redistribution. Taxation has efficiency and equity effects. Citizens and parties care about inequality in addition to their private concerns for consumption and votes respectively. In equilibrium, each party's strategy can be implemented by a proportional income tax at a rate common to all groups, and group-specific pork-barrel transfers proportionate to each group's political clout. The proportion coefficients chosen by each party reflect a compromise between its ideology and power hunger. Our results relate to "Director's Law", which says that redistributive politics favors middle classes at the expense of both rich and poor.
JEL Classification: D72, H21, H23
Suggested Citation: Suggested Citation