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Redistributive policies with heterogeneous social preferences of voters

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  • Dhami, Sanjit
  • al-Nowaihi, Ali

Abstract

There is growing evidence on the roles of fairness and other-regarding preferences as fundamental human motives. Call voters with fair preferences, as in Fehr and Schmidt (1999), fair-voters. By contrast, traditional political economy models are based on selfish-voters who derive utility solely from "own" payoff. In a general equilibrium model with endogenous labor supply, a mixture of fair and selfish voters choose optimal policy through majority voting. First, we show that majority voting produces a unique winner in pairwise contests over feasible policies (the Condorcet winner). Second, we show that a preference for greater fairness leads to greater redistribution. An increase in the number of fair voters can also lead to greater redistribution. Third, we show that in economies where the majority are selfish-voters, the decisive policy could be chosen by fair-voters, and vice versa. Fourth, while choosing labor supply, even fair voters behave exactly like selfish voters. We show how this apparently inconsistent behavior in different domains (voting and labor supply) can be rationalized within the model.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 6 (August)
Pages: 743-759

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:6:p:743-759

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Direct democracy Redistribution Other-regarding preferences;

References

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  1. Persson, T. & Tabellini, G., 1997. "Political Economics and Macroeconomic Policy," Papers 630, Stockholm - International Economic Studies.
  2. Sanjit Dhami & Ali Al-Nowaihi, 2010. "Existence of a Condorcet Winner When Voters Have Other-Regarding Preferences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(5), pages 897-922, October.
  3. Torsten Persson & Guido Tabellini, . "Political Economics and Public Finance," Working Papers 149, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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Citations

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Cited by:
  1. Höchtl, Wolfgang & Sausgruber, Rupert & Tyran, Jean-Robert, 2012. "Inequality aversion and voting on redistribution," European Economic Review, Elsevier, vol. 56(7), pages 1406-1421.
  2. Vinko Mu?tra & Lena Male?eviæ Peroviæ & Silvia Golem, 2013. "Social attitudes and regional inequalities," ERSA conference papers ersa13p678, European Regional Science Association.
  3. Christos Bilanakos, 2012. "Consumers’ Heterogeneity, Publicness of Goods and the Size of Public Sector," University of Cyprus Working Papers in Economics 18-2012, University of Cyprus Department of Economics.

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