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Are Efficiency Improvements In Government Transfer Policies Self‐Defeating In Political Equilibrium?

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  • John Douglas Wilson

Abstract

This paper studies an election game between two politicians, in which each provides income transfers to special‐interest groups in return for political contributions. It is shown that a move to a more inefficient form of transfers may lower the total excess burden created by these transfers, because the politicians are induced to reduce their provision of transfers. For the case in which the income transfers are indirectly provided as trade protection to import‐competing industries, a switch from production subsidies to tariffs as the form of protection reduces the equilibrium level of excess burden and makes both politicians better off.

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  • John Douglas Wilson, 1990. "Are Efficiency Improvements In Government Transfer Policies Self‐Defeating In Political Equilibrium?," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 241-258, November.
  • Handle: RePEc:bla:ecopol:v:2:y:1990:i:3:p:241-258
    DOI: 10.1111/j.1468-0343.1990.tb00032.x
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    References listed on IDEAS

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    1. Magee,Stephen P. & Brock,William A. & Young,Leslie, 1989. "Black Hole Tariffs and Endogenous Policy Theory," Cambridge Books, Cambridge University Press, number 9780521377003, January.
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    Cited by:

    1. Allan Drazen & Nuno Limão, 2004. "Government Gains from Self-Restraint: A Bargaining Theory of Inefficient Redistribution," NBER Working Papers 10375, National Bureau of Economic Research, Inc.
    2. Amihai GLAZER & Stef PROOST, 2008. "Capital-intensive projects induce more effort than labor-intensive projects," Working Papers of Department of Economics, Leuven ces0831, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    3. Drazen, Allan & Limão, Nuno, 2003. "Government Gains from Self-Restraint: A Bargaining Theory of Inefficient Redistribution Policies," CEPR Discussion Papers 4007, C.E.P.R. Discussion Papers.
    4. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2011. "Emergence And Persistence Of Inefficient States," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 177-208, April.
    5. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    6. Casey B. Mulligan & Xavier Sala-i-Martin, 2003. "Social Security, Retirement, and the Single-Mindedness of the Electorate," NBER Working Papers 9691, National Bureau of Economic Research, Inc.
    7. Daron Acemoglu, 2010. "Institutions, Factor Prices, and Taxation: Virtues of Strong States?," American Economic Review, American Economic Association, vol. 100(2), pages 115-119, May.
    8. Scott Bradford, 2000. "Rents, Votes, and Protection: Explaining the Structure of Trade Barriers Across Industries," Econometric Society World Congress 2000 Contributed Papers 1717, Econometric Society.
    9. Giovanni Facchini & Oliver Lorz & Gerald Willmann, 2006. "Asylum seekers in Europe: the warm glow of a hot potato," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 411-430, June.
    10. Pyne, Derek, 2006. "Microfoundations of Influencing Public Opinion: Lobbying and Voting for Trade Policies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 551-576.
    11. Raymond Riezman & John Douglas Wilson, 2013. "Political Reform and Trade Policy," World Scientific Book Chapters, in: Raymond Riezman (ed.), International Trade Agreements and Political Economy, chapter 13, pages 201-224, World Scientific Publishing Co. Pte. Ltd..
    12. Dani Rodrik, 1994. "What Does the Political Economy Literature on Trade Policy (Not) Tell UsThat We Ought To Know?," NBER Working Papers 4870, National Bureau of Economic Research, Inc.
    13. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
    14. Nuno Limão & Patricia Tovar, 2018. "Policy choice: Theory and evidence from commitment via international trade agreements," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 6, pages 179-198, World Scientific Publishing Co. Pte. Ltd..
    15. Crutzen, Benoît S.Y. & Sahuguet, Nicolas, 2009. "Redistributive politics with distortionary taxation," Journal of Economic Theory, Elsevier, vol. 144(1), pages 264-279, January.
    16. Fredriksson, Per G., 1998. "Environmental policy choice: Pollution abatement subsidies," Resource and Energy Economics, Elsevier, vol. 20(1), pages 51-63, March.
    17. Willmann, Gerald, 2003. "Why Legislators are Protectionists: The Role of Majoritarian Voting in Setting Tariffs," Economics Working Papers 2003-10, Christian-Albrechts-University of Kiel, Department of Economics.
    18. Magee, Christopher, 2003. "Endogenous tariffs and trade adjustment assistance," Journal of International Economics, Elsevier, vol. 60(1), pages 203-222, May.

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