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The Social Contract with Endogenous Sentiments

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Author Info

  • Cervellati, Matteo

    ()
    (University of Bologna)

  • Esteban, Joan

    ()
    (IAE Barcelona (CSIC))

  • Kranich, Laurence

    ()
    (University at Albany, SUNY)

Abstract

In this paper we present a model of rational voting over redistribution where individual self-esteem and relative esteem for others are endogenously determined. Individuals differ in their productivities, and their behaviour and political views are influenced by moral standards concerning work. Agents determine what they take to be proper behaviour and they judge others, and themselves, accordingly, increasing their esteem (or self-esteem) for those who perform in excess of the standard and decreasing their esteem for those who work less. The desired extent of redistribution depends both on individual income and on individual attitudes toward others. The model has two types of equilibria. In a “cohesive” equilibrium, all individuals conform to the standard of proper behaviour, income inequality is low and social esteem is not biased toward any particular type. Under these conditions equilibrium redistribution increases in response to larger inequality. In a “clustered" equilibrium skilled workers work above the mean while unskilled workers work below. In such an equilibrium, income inequality is large and sentiments are biased in favor of the industrious. As inequality increases, this bias may eventually overtake the egoistic demand for greater taxation and equilibrium redistribution decreases. The type of equilibrium to emerge crucially depends on inequality. We contrast the predictions of the model with data on inequality, redistribution, work values and attitudes toward work and toward the poor for a set of OECD countries.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2312.

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Length: 48 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2312

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Keywords: inequality; social contract; endogenous sentiments; voting over taxes; social norms; redistribution; politico-economic equilibrium;

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References

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Citations

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Cited by:
  1. Ernesto Dal Bó & Marko Terviö, 2008. "Self-Esteem, Moral Capital, and Wrongdoing," NBER Working Papers 14508, National Bureau of Economic Research, Inc.
  2. Benabou, Roland, 2008. "Ideology," IZA Discussion Papers 3416, Institute for the Study of Labor (IZA).
  3. Mouhoud, El Mouhoub & Miotti, Luis & Oudinet, Joël, . "Migration and Determinants of Remittances to Southern Mediterranean Countries: when history matters! Insights of two new surveys," Economics Papers from University Paris Dauphine 123456789/2574, Paris Dauphine University.
  4. Miquel Pellicer & Vimal Ranchhod & Mare Sarr & Eva Wegner, 2011. "Inequality Traps in South Africa: An overview and research agenda," SALDRU Working Papers 57, Southern Africa Labour and Development Research Unit, University of Cape Town.
  5. R. I. Luttens & M.A. Valfort, 2008. "Voting for redistribution under desert-sensitive altruism," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/531, Ghent University, Faculty of Economics and Business Administration.

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