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Inequality and Political Consensus

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  • Grüner, Hans Peter
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    Abstract

    This paper develops a model of political consensus in order to explain the missing link between inequality and political redistribution. Political consensu s is an implicit agreement not to vote for extreme policy proposals. We show tha t such an agreement may play an efficiency-enhancing role. Voters anticipate that voting for extremist parties increases policy uncertainty in the future. A pol itical consensus among voters reduces policy uncertainty because power-seeking p oliticians propose non-discriminatory policies in their own interest. We study h ow much inequality can be sustained in a democracy and how the limits to redistr ibution vary with initial inequality. We find that more inequality need not lead to more redistribution. The maximum amount of redistribution decreases with ine quality if (and only if) agents are sufficiently patient. In this case inequalit y is politically self-sustaining.

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    Bibliographic Info

    Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 591.

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    Length: pages
    Date of creation: Feb 1999
    Date of revision:
    Handle: RePEc:bon:bonsfa:591

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    Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
    Fax: +49 228 73 6884
    Web page: http://www.bgse.uni-bonn.de/index.php?id=517

    Related research

    Keywords: inequality; representative democracy; political consensus; policy uncertain ty; comparative statics in political economy.;

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    References

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    1. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March.
    2. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
    3. Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Social Choice: A Mean Voter Theorem," Cowles Foundation Discussion Papers 938, Cowles Foundation for Research in Economics, Yale University.
    4. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
    5. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
    6. Clarke, George R. G., 1992. "More evidence on income distribution and growth," Policy Research Working Paper Series 1064, The World Bank.
    7. Bénabou, Roland, 1996. "Unequal Societies," CEPR Discussion Papers 1419, C.E.P.R. Discussion Papers.
    8. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 497-529, May.
    9. Gene Grossman & Elhanan Helpman, 1994. "Electoral Competition and Special Interest Politics," NBER Working Papers 4877, National Bureau of Economic Research, Inc.
    10. Coughlin, Peter & Nitzan, Shmuel, 1981. "Electoral outcomes with probabilistic voting and Nash social welfare maxima," Journal of Public Economics, Elsevier, vol. 15(1), pages 113-121, February.
    11. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February.
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