I propose a framework in which individual political participation is endogenous and can take two distinct forms, voting and contributing resources to campaigns, in a context in which the negligible impact of any individual’s actions on aggregate outcomes is fully recognized by all agents. I then use the framework to reassess the relationship between inequality and redistribution. The model shows that the interaction between contributions and voting leads to an endogenous wealth bias in the political process, as the advantage of wealthier individuals in providing contributions encourages parties to move their platforms closer to those individuals’ preferred positions. This mechanism can in turn explain why the standard median-voter-based prediction, that more inequality produces more redistribution, has received little empirical support: Higher inequality endogenously shifts the political system further in favor of the rich. In equilibrium, there is a non-monotonic relationship in which redistribution is initially increasing but eventually decreasing in inequality. The model also delivers a number of testable predictions on how inequality will affect political participation. I present empirical evidence supporting those predictions, and hence the mechanism proposed, using data on campaign contributions and voting from US presidential elections.
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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number
rwp07-045.
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Find related papers by JEL classification: D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Roland Bénabou, 1996.
"Inequality and Growth,"
NBER Chapters,
in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92
National Bureau of Economic Research, Inc.
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