Advanced Search
MyIDEAS: Login

Political Economy of Director's Law: How Sincere Voters Decide on Cash and In-kind Redistribution in a Costly Political Framework

Contents:

Author Info

  • Francesco Scervini

    ()
    (University of Torino)

Abstract

The amount of taxes and public expenditures seems to be uncorrelated to the level of market inequality in OECD countries. This empirical evidence is diffcult to be rationalized in a standard median voter theorem setting, where individuals rationally choose their preferred redistribution scheme. This paper reconciles theory and evidence by introducing a source of political asymmetry, that is income inequality: assuming that political activity is costly, income distribution can be a determinant of political asymmetry, provided that some classes of individuals are not able to satisfy their political budget constraint. The political framework consists of a bi-dimensional policy space where preferences over cash redistribution are monotonically decreasing with income, while those over in-kind redistribution depend on the middle class position, according to Director's law. The result is that the elected policy maker is increasingly biased toward rich classes of population as far as market income inequality increases.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://web.econ.unito.it/prato/papers/n8.pdf
File Function: First version, 2009
Download Restriction: no

Bibliographic Info

Paper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 8.

as in new window
Length: 45 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:tur:wpaper:8

Contact details of provider:
Postal: Corso Unione Sovietica 218 bis, Torino
Phone: +39 011 6706128
Fax: +39 011 6706062
Email:
Web page: http://eco83.econ.unito.it/prato/
More information through EDIRC

Related research

Keywords: Income distribution; Redistribution; Political process; Publicly provided goods;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Daniela Sonedda & Gilberto Turati, 2005. "Winners and Losers in the Italian Welfare State: A Microsimulation Analysis of Income Redistribution Considering In-Kind Transfers," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(4), pages 423-464, December.
  2. Francesco Scervini, 2012. "Empirics of the median voter: democracy, redistribution and the role of the middle class," Journal of Economic Inequality, Springer, vol. 10(4), pages 529-550, December.
  3. Bénabou, Roland & Ok, Efe, 1997. "Social Mobility and the Demand for Redistribution : the POUM Hypothesis," IDEI Working Papers 78, Institut d'Économie Industrielle (IDEI), Toulouse, revised 1999.
  4. Saint-Paul, Gilles & Verdier, Thierry, 1992. "Education, Democracy and Growth," CEPR Discussion Papers 613, C.E.P.R. Discussion Papers.
  5. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-98, December.
  6. Oded Galor & Joseph Zeira, 2013. "Income Distribution and Macroeconomics," Working Papers 2013-12, Brown University, Department of Economics.
  7. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May.
  8. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  9. Rolf Aaberge & Audun Langørgen, 2003. "Measuring the Benefits from Public Services The Effects of Local Government Spending on the Distribution of Income in Norway," Discussion Papers 339, Research Department of Statistics Norway.
  10. Bourguignon, Francois & Verdier, Thierry, 2000. "Oligarchy, democracy, inequality and growth," Journal of Development Economics, Elsevier, vol. 62(2), pages 285-313, August.
  11. Morelli, Massimo, 1998. "Party Formation and Policy Outcomes Under Different Electoral Systems," Staff General Research Papers 1242, Iowa State University, Department of Economics.
  12. Stigler, George J, 1970. "Director's Law of Public Income Redistribution," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 1-10, April.
  13. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  14. 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.
  15. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
  16. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  17. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Francesco Scervini, 2012. "Empirics of the median voter: democracy, redistribution and the role of the middle class," Journal of Economic Inequality, Springer, vol. 10(4), pages 529-550, December.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:tur:wpaper:8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simone Pellegrino).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.