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Why Hasn't Democracy Slowed Rising Inequality?

Author

Listed:
  • Adam Bonica
  • Nolan McCarty
  • Keith T. Poole
  • Howard Rosenthal

Abstract

During the past two generations, democratic forms have coexisted with massive increases in economic inequality in the United States and many other advanced democracies. Moreover, these new inequalities have primarily benefited the top 1 percent and even the top .01 percent. These groups seem sufficiently small that economic inequality could be held in check by political equality in the form of "one person, one vote." In this paper, we explore five possible reasons why the US political system has failed to counterbalance rising inequality. First, both Republicans and many Democrats have experienced an ideological shift toward acceptance of a form of free market capitalism that offers less support for government provision of transfers, lower marginal tax rates for those with high incomes, and deregulation of a number of industries. Second, immigration and low turnout of the poor have combined to make the distribution of voters more weighted to high incomes than is the distribution of households. Third, rising real income and wealth has made a larger fraction of the population less attracted to turning to government for social insurance. Fourth, the rich have been able to use their resources to influence electoral, legislative, and regulatory processes through campaign contributions, lobbying, and revolving door employment of politicians and bureaucrats. Fifth, the political process is distorted by institutions that reduce the accountability of elected officials to the majority and hampered by institutions that combine with political polarization to create policy gridlock.

Suggested Citation

  • Adam Bonica & Nolan McCarty & Keith T. Poole & Howard Rosenthal, 2013. "Why Hasn't Democracy Slowed Rising Inequality?," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 103-124, Summer.
  • Handle: RePEc:aea:jecper:v:27:y:2013:i:3:p:103-24
    Note: DOI: 10.1257/jep.27.3.103
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.3.103
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    References listed on IDEAS

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    1. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
    2. Torsten Persson & Gerard Roland & Guido Tabellini, 2000. "Comparative Politics and Public Finance," Journal of Political Economy, University of Chicago Press, vol. 108(6), pages 1121-1161, December.
    3. Ansolabehere, Stephen & Hersh, Eitan, 2012. "Validation: What Big Data Reveal About Survey Misreporting and the Real Electorate," Political Analysis, Cambridge University Press, vol. 20(04), pages 437-459, September.
    4. Levitt, Steven D, 1994. "Using Repeat Challengers to Estimate the Effect of Campaign Spending on Election Outcomes in the U.S. House," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 777-798, August.
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    Citations

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    Cited by:

    1. repec:fsu:wpaper:wp2013_12_01 is not listed on IDEAS
    2. Vladimir Mau & Sergey Ulyukaev, 2015. "Глобальный Кризис и Вызовы Экономической Политики Современной России (Global Crisis and the Economic Policy Challenges of Modern Russia)," Working Papers 126, Gaidar Institute for Economic Policy, revised 2015.
    3. repec:kap:expeco:v:20:y:2017:i:2:d:10.1007_s10683-016-9490-3 is not listed on IDEAS
    4. Peter H. Lindert, 2017. "The Rise and Future of Progressive Redistribution," Commitment to Equity (CEQ) Working Paper Series 73, Tulane University, Department of Economics.
    5. Paul Maarek & Renaud Bourlès & Michael T.Dorsch, 2014. "Income Redistribution and the Diversity of Consumer Goods," THEMA Working Papers 2014-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Jon D. Wisman, 2015. "What Drives Inequality?," Working Papers 2015-09, American University, Department of Economics.
    7. Dmitry Ryvkin & Anastasia Semykina, 2015. "The chicken or the egg: An experimental study of democracy survival, income, and inequality," Working Papers wp2015_11_01, Department of Economics, Florida State University.
    8. Rauh, Christopher, 2017. "Voting, education, and the Great Gatsby Curve," Journal of Public Economics, Elsevier, vol. 146(C), pages 1-14.
    9. Loek Groot & Daan Linde, 2016. "Income inequality, redistribution and the position of the decisive voter," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(3), pages 269-287, September.
    10. Christopher Rauh, 2015. "The Political Economy of Early and College Education - Can Voting Bend the Great Gatsby Curve?," 2015 Meeting Papers 82, Society for Economic Dynamics.
    11. Jon D. Wisman & Aaron Pacitti, 2014. "What the Rich Won Over the Past 35 Years and What Everyone Else Lost," Working Papers 2014-08, American University, Department of Economics.
    12. Wolton, Stephane, 2017. "Are Biased Media Bad for Democracy?," MPRA Paper 84837, University Library of Munich, Germany.
    13. Sudip Ranjan Basu, "undated". "Do data show divergence? Revisiting global income inequality trends," MPDD Working Paper Series WP/17/03, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    14. Konstantinos Matakos & Dimitrios Xefteris, 2017. "Divide and rule: redistribution in a model with differentiated candidates," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(4), pages 867-902, April.
    15. repec:eee:rujoec:v:1:y:2015:i:1:p:4-29 is not listed on IDEAS
    16. Corneo, Giacomo & Neher, Frank, 2015. "Democratic redistribution and rule of the majority," European Journal of Political Economy, Elsevier, vol. 40(PA), pages 96-109.
    17. Mau, Vladimir & Ulyukaev, Sergey, 2015. "Global Crisis and the Economic Policy Challenges of Modern Russia," Published Papers dok23, Russian Presidential Academy of National Economy and Public Administration.
    18. Eoin McGuirk & Nathaniel Hilger & Nicholas Miller, 2017. "No Kin In The Game: Moral Hazard and War in the U.S. Congress," NBER Working Papers 23904, National Bureau of Economic Research, Inc.
    19. Pierre-Yves Néron, 2016. "Rethinking the Ethics of Corporate Political Activities in a Post-Citizens United Era: Political Equality, Corporate Citizenship, and Market Failures," Journal of Business Ethics, Springer, vol. 136(4), pages 715-728, July.
    20. repec:voj:journl:v:63:y:2016:i:1:p:1-24 is not listed on IDEAS
    21. repec:psl:pslqrr:2017:22 is not listed on IDEAS
    22. Alain Trannoy, 2015. "Inequality and welfare: Is Europe special?," Working Papers 384, ECINEQ, Society for the Study of Economic Inequality.
    23. Xiaobing Shuai, 2015. "Do Economic Development Efforts Benefit All? Business Attraction and Income Inequality," The Review of Regional Studies, Southern Regional Science Association, vol. 45(1), pages 35-56, Spring.
    24. Saito, Yuta, 2016. "Dynamic Bargaining over Redistribution with Endogenous Distribution of Political Power," MPRA Paper 71130, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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