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Inequality, Redistribution, And Rent-Seeking

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  • Francisco Rodríguez

Abstract

This paper presents a non-median voter model of redistribution in which greater inequality leads to lower redistribution. Bargaining between interest groups and politicians over exemptions implies that individuals with sufficiently high income will not pay taxes in equilibrium. Therefore, voters will set tax rates low enough so as to control the incentives for rent-seeking. An increase in inequality, by putting more income in the hands of individuals that can buy exemptions, will lead to lower equilibrium redistribution. The model can be used to account for a negative relationship between inequality and growth and provides a new explanation of why the poor do not expropriate the rich in democracies. Copyright Blackwell Publishing Ltd 2004.

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  • Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent-Seeking," Economics and Politics, Wiley Blackwell, vol. 16, pages 287-320, November.
  • Handle: RePEc:bla:ecopol:v:16:y:2004:i::p:287-320
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    Cited by:

    1. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    2. Gradstein, Mark, 2003. "The political economy of public spending on education, inequality, and growth," Policy Research Working Paper Series 3162, The World Bank.
    3. Alberto F. Alesina & Paola Giuliano, 2009. "Preferences for Redistribution," NBER Working Papers 14825, National Bureau of Economic Research, Inc.
    4. Campante, Filipe R., 2011. "Redistribution in a model of voting and campaign contributions," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 646-656, August.
    5. Gilles le Garrec, 2009. "Feeling guilty and redistributive politics," Documents de Travail de l'OFCE 2009-22, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    7. 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.
    8. Ryo Arawatari & Tetsuo Ono, 2009. "The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy," Discussion Papers in Economics and Business 09-38-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Aug 2010.
    9. Rafael Gomez & David K. Foot, 2003. "Age Structure, Income Distribution and Economic Growth," Canadian Public Policy, University of Toronto Press, vol. 29(s1), pages 141-162, January.
    10. Di Gioacchino, Debora & Sabani, Laura, 2009. "Education policy and inequality: A political economy approach," European Journal of Political Economy, Elsevier, vol. 25(4), pages 463-478, December.
    11. Campante, Filipe R. & Ferreira, Francisco H.G., 2007. "Inefficient lobbying, populism and oligarchy," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 993-1021, June.
    12. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
    13. Matteo Cervellati & Joan-Maria Esteban & Laurence Kranich, 2010. "Work Values, Endogenous Sentiments and Redistribution," Working Papers 434, Barcelona Graduate School of Economics.
    14. Alesina, Alberto & Baqir, Reza & Easterly, William, 2000. "Redistributive Public Employment," Journal of Urban Economics, Elsevier, vol. 48(2), pages 219-241, September.
    15. Kosec, Katrina, 2014. "Relying on the private sector: The income distribution and public investments in the poor," Journal of Development Economics, Elsevier, vol. 107(C), pages 320-342.
    16. Aysan, Ahmet Faruk, 2005. "The Shadowing Role of Redistributive Institutions in the Relationship Between Income Inequality and Redistribution," MPRA Paper 17772, University Library of Munich, Germany.
    17. Di Gioacchino, Debora & Sabani, Laura & Tedeschi, Simone, 2014. "Preferences for social protection: Theory and empirics," Economic Modelling, Elsevier, vol. 36(C), pages 629-644.
    18. Aysan, Ahmet Faruk, 2005. "The Role of Efficiency of Redistributive Institutions on Redistribution: An Empirical Assessment," MPRA Paper 17773, University Library of Munich, Germany.
    19. Claudio Agostini & Phillip Brown, 2007. "Desigualdad geográfica en Chile," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 22(1), pages 3-33, June.
    20. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
    21. Alberto Melo, 2003. "Colombia: Los problemas de competitividad de un país en conflicto," Research Department Publications 1002, Inter-American Development Bank, Research Department.
    22. Haile, Daniel T., 2005. "Wealth Distribution, Lobbying and Economic Growth: Theory and Evidence," WIDER Working Paper Series 021, World Institute for Development Economic Research (UNU-WIDER).

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