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Left, Right, Left: Income and Political Dynamics in Transition Economies

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  • Michael Carter
  • John Morrow

Abstract

The political left turn in Latin America, which lagged its transition to liberalized market economies by a decade or more, challenges conventional economic explanations of voting behavior. While the implications of upward mobility for the political preferences of forward-looking voters have been studied, neither the upward mobility model nor conventional myopic median voter models are well equipped to explain Latin America's political transformation. This paper generalizes the forward-looking voter model to consider a broad range of dynamic processes. When voters have full information on the nature of income dynamics in a transition economy, we show that strong support for redistributive policies will materialize rapidly if income dynamics offer few prospects of upward mobility for key sections of the electorate. In contrast, when voters have imperfect information, our model predicts a slow and politically polarizing shift toward redistributive voter preferences under these same non-concave income dynamics. Simulation using fitted income dynamics for two Latin American economies suggests that the imperfect information model better accounts for the observed shift back to the left in Latin America, and that this generalized, forward-looking voter approach may offer additional insights about political dynamics in other transition economies.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1111.

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Date of creation: Jan 2012
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Handle: RePEc:cep:cepdps:dp1111

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: income dynamics; redistributive politics; polarization; Bayesian learning; Latin America;

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  1. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  2. Michelle Adato & Michael Carter & Julian May, 2006. "Exploring poverty traps and social exclusion in South Africa using qualitative and quantitative data," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 226-247.
  3. Travis J. Lybbert & Christopher B. Barrett & Solomon Desta & D. Layne Coppock, 2004. "Stochastic wealth dynamics and risk management among a poor population," Economic Journal, Royal Economic Society, vol. 114(498), pages 750-777, October.
  4. Leonardo Gasparini & Matias Horenstein & Ezequiel Molina & Sergio Olivieri, 2008. "Income Polarization in Latin America: Patterns and Links with Institutions and Conflict," Oxford Development Studies, Taylor & Francis Journals, vol. 36(4), pages 461-484.
  5. Banerjee, Abhijit V & Newman, Andrew F, 1994. "Poverty, Incentives, and Development," American Economic Review, American Economic Association, vol. 84(2), pages 211-15, May.
  6. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
  7. Costas Aariadis & John Stachurski, 2004. "Poverty Traps," Department of Economics - Working Papers Series 913, The University of Melbourne.
    • Azariadis, Costas & Stachurski, John, 2005. "Poverty Traps," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 5 Elsevier.
  8. Javier Santiso, 2007. "Latin America's Political Economy of the Possible: Beyond Good Revolutionaries and Free-Marketeers," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262693593, December.
  9. repec:cup:cbooks:9780521855266 is not listed on IDEAS
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Left, Right, Left: Income and Political Dynamics in Transition Economies
    by Maximo Rossi in Wikiprogress América Latina on 2012-01-22 18:40:00

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