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On Political and Economic Determinants of Redistribution: Economic Gains, Ideological Gains, or Institutions?

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Abstract

I describe a structural method to quantify the contribution of different elements of social choice to the level of redistribution. Estimating a DSGE model with microdata on the support for redistribution, I find that if voters disregarded their ideological views on welfare policies, redistribution in the U.S. would increase 117%. Because ideology is a more important determinant of voting behavior than income, increasing voter turnout or capping campaign contributions would have a small effect on redistribution. Among the drivers of ideology, I find that racial animosity and distrust of the government contributes to an 80% and 44% smaller redistribution, respectively.

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  • Gustavo de Souza, 2022. "On Political and Economic Determinants of Redistribution: Economic Gains, Ideological Gains, or Institutions?," Working Paper Series WP 2022-47, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:94914
    DOI: 10.21033/wp-2022-47
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    Cited by:

    1. Daniel R. Carroll & Andre Luduvice & Eric Young, 2023. "Optimal Fiscal Reform with Many Taxes," Working Papers 23-07, Federal Reserve Bank of Cleveland.

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    More about this item

    Keywords

    Redistribution; Prefereces for Redistribution; Dynamic Macro Models of Political-Economoy;
    All these keywords.

    JEL classification:

    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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