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Inequality and Political Consensus

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Author Info
Grüner, Hans Peter
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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Publisher Info
Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 591.

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Date of creation: Feb 1999
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Handle: RePEc:bon:bonsfa:591

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

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

Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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References listed on IDEAS
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  1. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June. [Downloadable!] (restricted)
    Other versions:
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March. [Downloadable!] (restricted)
  4. Andrew Caplin & Barry Nalebuff, 1990. "Aggregation and Social Choice: A Mean Voter Theorem," Cowles Foundation Discussion Papers 938, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  5. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  6. Benabou, R., 1996. "Unequal Societies," Working Papers 96-17, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  7. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May. [Downloadable!] (restricted)
    Other versions:
  8. 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. [Downloadable!] (restricted)
  9. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 265-86, April. [Downloadable!] (restricted)
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  10. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August. [Downloadable!] (restricted)
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  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. [Downloadable!] (restricted)
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