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The political economy of redistribution under asymmetric information

  • Dhami, Sanjit

This paper examines the political economy of redistribution when voters have asymmetric information about the redistributive preferences of politicians and the latter cannot make credible policy commitments. The candidates in each party are endogenously selected by a process of Nash Bargaining between the competing factions. In equilibrium, there is "partial convergence" of redistributive policies, support for "Director's Law", the possibility of "policy reversals" across the parties, and "inter term tax variability" (political budget cycles) during the tenure of a politician. The effect of inequality on the magnitude of the redistributive activity depends in important ways on the incentives and constraints facing politicians.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 87 (2003)
Issue (Month): 9-10 (September)
Pages: 2069-2103

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Handle: RePEc:eee:pubeco:v:87:y:2003:i:9-10:p:2069-2103
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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