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Voting for income-immiserizing redistribution in the Meltzer-Richard model

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  • Barnett, Richard C.
  • Bhattacharya, Joydeep
  • Bunzel, Helle

Abstract

This paper argues that income received via redistributive transfers, unlike labor income, requires no direct sacrifice of leisure; this makes it attractive to many voters even if it leaves them poorer. This point is made within the classic Meltzer and Richard (1981) model wherein heterogeneous voters evaluate an income-redistribution program that finances a lump-sum transfer to all via a distorting income tax. The political-equilibrium policy under majority rule is the tax most preferred, utility-wise, by the median voter. She, and many poorer voters, may support income redistribution that, ironically, leaves them poorer in income terms but with higher utility.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 36600.

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Date of creation: 29 Sep 2013
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Publication status: Forthcoming in Economic Inquiry
Handle: RePEc:isu:genres:36600

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Keywords: income redistribution; voting; Meltzer-Richard;

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  1. Allan Meltzer & Scott Richard, 1983. "Tests of a rational theory of the size of government," Public Choice, Springer, Springer, vol. 41(3), pages 403-418, January.
  2. Borge, Lars-Erik & Rattso, J.Jorn, 2004. "Income distribution and tax structure: Empirical test of the Meltzer-Richard hypothesis," European Economic Review, Elsevier, Elsevier, vol. 48(4), pages 805-826, August.
  3. Christian Traxler, 2009. "Majority Voting and the Welfare Implications of Tax Avoidance," Working Paper Series of the Max Planck Institute for Research on Collective Goods, Max Planck Institute for Research on Collective Goods 2009_22, Max Planck Institute for Research on Collective Goods.
  4. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262661314, December.
  5. Marina Azzimonti & Eva de Francisco & Per Krusell, 2008. "Aggregation and Aggregation," Journal of the European Economic Association, MIT Press, MIT Press, vol. 6(2-3), pages 381-394, 04-05.
  6. Hodler, Roland, 2008. "Leisure and redistribution," European Journal of Political Economy, Elsevier, vol. 24(2), pages 354-363, June.
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