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Positional concern and low demand for redistribution of the poor

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  • Kim, Duk Gyoo

Abstract

The two observations that (1) some low-income citizens demand low redistribution and (2) as income inequality becomes more severe a larger proportion of citizens make less demand for redistribution (Kelly and Enns (2010)) are counter-intuitive because people oppose redistribution that could be beneficial to them. Understanding the main driving factor that leads to the economic conservatism of the poor is crucial: it guides how policymakers should design redistribution. I show that positional concern can be one of these main factors. When citizens care about their relative position on consumption and their labor productivity is slightly perturbed when a new tax policy is implemented, only middle-income citizens may vote for redistribution. Compared with the prospect of upward mobility hypothesis, I provide a testable prediction for the relationship between economic inequality and the economic conservatism of the poor. If positional concern is the main driving factor, policymakers should focus on increasing the low-income citizens’ standard of living to the middle class; and if the prospect of upward mobility is the main factor then they should focus on minimizing income gaps.

Suggested Citation

  • Kim, Duk Gyoo, 2019. "Positional concern and low demand for redistribution of the poor," European Journal of Political Economy, Elsevier, vol. 56(C), pages 27-38.
  • Handle: RePEc:eee:poleco:v:56:y:2019:i:c:p:27-38
    DOI: 10.1016/j.ejpoleco.2018.06.004
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    More about this item

    Keywords

    Economic conservatism; Economic inequality; Redistribution; Externality; Positional concern;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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