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The Political Economy of Occupational Mobility and Redistribution Policy

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  • Ryo Arawatari

    ()
    (Graduate School of Economics, Osaka University)

  • Tetsuo Ono

    ()
    (Graduate School of Economics, Osaka University)

Abstract

In this study, we ask why countries with similar labor market characteristics experience different occupational mobility levels and redistribution policies. We develop a politico-economic model that integrates occupational mobility affected by individual educational investments with voting on redistribution policies. It is shown that a rigid labor market will tend to produce multiple equilibria: a poor-majority equilibrium with lower mobility and higher redistribution and a rich-majority equilibrium with higher mobility and lower redistribution. However, a flexible labor market will tend to produce a unique, poor-majority equilibrium with high mobility and low redistribution, which supports the POUM (prospect of upward mobility) hypothesis. Deregulation in the labor market enhances mobility but may degrade social welfare.

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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-18.

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Length: 59 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:osk:wpaper:0818

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Occupational mobility; Political economy; Stationary Markov perfect equilibrium; Redistribution;

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References

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  1. Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002. "The Survival of the Welfare State," Seminar Papers 704, Stockholm University, Institute for International Economic Studies.
  2. Bénabou, Roland & Ok, Efe A, 1998. "Social Mobility and the Demand for Redistribution: the POUM Hypothesis," CEPR Discussion Papers 1955, C.E.P.R. Discussion Papers.
  3. Jarvis, Sarah & Jenkins, Stephen P, 1998. "How Much Income Mobility Is There in Britain?," Economic Journal, Royal Economic Society, vol. 108(447), pages 428-43, March.
  4. Arawatari, Ryo & Ono, Tetsuo, 2009. "A second chance at success: A political economy perspective," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1249-1277, May.
  5. Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2003. "Democratic Public Good Provision," CEPR Discussion Papers 4044, C.E.P.R. Discussion Papers.
  6. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 551-84, August.
  7. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  8. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  9. Alesina, Alberto F & La Ferrara, Eliana, 2002. "Preferences for Redistribution in the Land of Opportunities," CEPR Discussion Papers 3155, C.E.P.R. Discussion Papers.
  10. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  11. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
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Cited by:
  1. Arawatari, Ryo & Ono, Tetsuo, 2013. "Inequality, mobility and redistributive politics," Journal of Economic Theory, Elsevier, vol. 148(1), pages 353-375.

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