IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v56y2019icp27-38.html
   My bibliography  Save this article

Positional concern and low demand for redistribution of the poor

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0176268018300880
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
    3. Baron, David P. & Ferejohn, John A., 1989. "Bargaining in Legislatures," American Political Science Review, Cambridge University Press, vol. 83(4), pages 1181-1206, December.
    4. Agranov, Marina & Palfrey, Thomas R., 2015. "Equilibrium tax rates and income redistribution: A laboratory study," Journal of Public Economics, Elsevier, vol. 130(C), pages 45-58.
    5. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
    6. David Gill & Zdenka Kissová & Jaesun Lee & Victoria Prowse, 2019. "First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision," Management Science, INFORMS, vol. 65(2), pages 494-507, February.
    7. Dan Kovenock & Michael R. Baye & Casper G. de Vries, 1996. "The all-pay auction with complete information (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 291-305.
    8. Erzo F. P. Luttmer, 2005. "Neighbors as Negatives: Relative Earnings and Well-Being," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 963-1002.
    9. Frank, Robert H., 2008. "Should public policy respond to positional externalities?," Journal of Public Economics, Elsevier, vol. 92(8-9), pages 1777-1786, August.
    10. repec:hrv:faseco:30750027 is not listed on IDEAS
    11. John Ledyard, 1984. "The pure theory of large two-candidate elections," Public Choice, Springer, vol. 44(1), pages 7-41, January.
    12. Ireland, Norman J., 1994. "On limiting the market for status signals," Journal of Public Economics, Elsevier, vol. 53(1), pages 91-110, January.
    13. Cruces, Guillermo & Perez-Truglia, Ricardo & Tetaz, Martin, 2013. "Biased perceptions of income distribution and preferences for redistribution: Evidence from a survey experiment," Journal of Public Economics, Elsevier, vol. 98(C), pages 100-112.
    14. Andrew E. Clark & Paul Frijters & Michael A. Shields, 2008. "Relative Income, Happiness, and Utility: An Explanation for the Easterlin Paradox and Other Puzzles," Journal of Economic Literature, American Economic Association, vol. 46(1), pages 95-144, March.
    15. 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 914-927, October.
    16. Keith Blackburn & David Chivers, 2015. "Fearing the worst: the importance of uncertainty for inequality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 345-370, October.
    17. Xi Chen, 2014. "Gift-Giving and Network Structure in Rural China: Utilizing Long-Term Spontaneous Gift Records," PLOS ONE, Public Library of Science, vol. 9(8), pages 1-14, August.
    18. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-116, March.
    19. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2003. "People's opium? Religion and economic attitudes," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 225-282, January.
    20. Andrea Gallice & Edoardo Grillo, 2016. "Economic and Class Voting in a Model of Redistribution with Social Concerns," Carlo Alberto Notebooks 448, Collegio Carlo Alberto.
    21. Raj Chetty & Nathaniel Hendren & Patrick Kline & Emmanuel Saez, 2014. "Where is the land of Opportunity? The Geography of Intergenerational Mobility in the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 129(4), pages 1553-1623.
    22. Nathan J. Kelly & Peter K. Enns, 2010. "Inequality and the Dynamics of Public Opinion: The Self‐Reinforcing Link Between Economic Inequality and Mass Preferences," American Journal of Political Science, John Wiley & Sons, vol. 54(4), pages 855-870, October.
    23. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    24. Ryan W. Buell & Taly Reich & Michael I. Norton, 2014. ""Last-Place Aversion": Evidence and Redistributive Implications," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 105-149.
    25. Yamamura, Eiji, 2012. "Social capital, household income, and preferences for income redistribution," European Journal of Political Economy, Elsevier, vol. 28(4), pages 498-511.
    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


    Cited by:

    1. Andreoli, Francesco & Olivera, Javier, 2020. "Preferences for redistribution and exposure to tax-benefit schemes in Europe," European Journal of Political Economy, Elsevier, vol. 63(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Darong Dai, 2020. "Voting over selfishly optimal tax schedules: Can Pigouvian tax redistribute income?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1660-1686, September.
    2. Bilancini, Ennio & Boncinelli, Leonardo, 2019. "Wage inequality, labor income taxes, and the notion of social status," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 13, pages 1-35.
    3. Gallice, Andrea, 2018. "Social status, preferences for redistribution and optimal taxation: A survey," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 12, pages 1-17.
    4. Clark, Andrew E. & D'Ambrosio, Conchita, 2014. "Attitudes to Income Inequality: Experimental and Survey Evidence," IZA Discussion Papers 8136, Institute of Labor Economics (IZA).
    5. Kristoffer B. Hvidberg & Claus T. Kreiner & Stefanie Stantcheva, 2021. "Social Position and Fairness Views," CEBI working paper series 21-04, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    6. Clément Bellet, 2017. "Essays on Inequality, Social Preferences and Consumer Behavior," Sciences Po publications info:hdl:2441/vbu6kd1s68o, Sciences Po.
    7. Kristoffer Balle Hvidberg & Claus Thustrup Kreiner & Stefanie Stantcheva, 2021. "Social Position and Fairness Views," CESifo Working Paper Series 8928, CESifo.
    8. Perez Truglia, Ricardo Nicolas, 2007. "Conspicuous consumption in the land of Prince Charming," MPRA Paper 22009, University Library of Munich, Germany, revised 22 Mar 2010.
    9. Cruces, Guillermo & Perez-Truglia, Ricardo & Tetaz, Martin, 2013. "Biased perceptions of income distribution and preferences for redistribution: Evidence from a survey experiment," Journal of Public Economics, Elsevier, vol. 98(C), pages 100-112.
    10. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "Positional preferences in time and space: Optimal income taxation with dynamic social comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 1-23.
    11. Andrew E. Clark & Nicolai Kristensen & Niels Westergård‐Nielsen, 2009. "Job Satisfaction and Co‐worker Wages: Status or Signal?," Economic Journal, Royal Economic Society, vol. 119(536), pages 430-447, March.
    12. Davis, Lewis S., 2018. "Political economy of growth with a taste for status," Journal of Public Economics, Elsevier, vol. 168(C), pages 35-46.
    13. Thomas Aronsson & Olof Johansson-Stenman, 2013. "Veblen’s theory of the leisure class revisited: implications for optimal income taxation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 551-578, September.
    14. Ricardo Perez-Truglia, 2020. "The Effects of Income Transparency on Well-Being: Evidence from a Natural Experiment," American Economic Review, American Economic Association, vol. 110(4), pages 1019-1054, April.
    15. Andreoli, Francesco & Olivera, Javier, 2020. "Preferences for redistribution and exposure to tax-benefit schemes in Europe," European Journal of Political Economy, Elsevier, vol. 63(C).
    16. Axel Ockenfels & Dirk Sliwka & Peter Werner, 2015. "Bonus Payments and Reference Point Violations," Management Science, INFORMS, vol. 61(7), pages 1496-1513, July.
    17. Eiji Yamamura & Yoshiro Tsutsui & Fumio Ohtake, 2016. "Relative Income Position and Happiness: Are Cabinet Supporters Different from Others in Japan?," The Japanese Economic Review, Springer, vol. 67(4), pages 383-402, December.
    18. Erik Schokkaert & Tom Truyts, 2017. "Preferences for redistribution and social structure," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 545-576, December.
    19. Pascal Courty & Merwan Engineer, 2019. "A pure hedonic theory of utility and status: Unhappy but efficient invidious comparisons," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(4), pages 601-621, August.
    20. Luna Bellani & Heinrich Ursprung, 2016. "The Political Economy of Redistribution Policy," CESifo Working Paper Series 6189, CESifo.

    More about this item

    Keywords

    Economic conservatism; Economic inequality; Redistribution; Externality; Positional concern;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:56:y:2019:i:c:p:27-38. 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: . General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nithya Sathishkumar (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.