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Inefficient redistribution and inefficient redistributive politics

  • Dan Kovenock

    ()

  • Brian Roberson

    ()

This paper examines the effect of inefficient redistribution in Myerson’s (1993) model of redistributive politics. Regardless of the absolute levels of the efficiency of political parties’ transfers to different voter segments, parties have incentive to (stochastically) shift resources away from voter segments with large relative efficiency gaps between the two parties’ transfers towards voter segments with smaller relative efficiency gaps. Because of this dependence on relative, and not absolute, levels of efficiency, the parties’ optimal strategies may lead to large discrepancies between the sum of the budgetary transfers and the sum of the effective transfers. At the extreme, in the spirit of Magee, Brock, and Young (1989), we obtain „black hole” inefficiency. When the model is extended to allow for loyal voter segments and loyalty to a party is positively related to the efficiency of that party’s transfers to the segment, the incentives leading to black hole inefficiency become even stronger.

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File URL: http://hdl.handle.net/10.1007/s11127-008-9392-9
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Article provided by Springer in its journal Public Choice.

Volume (Year): 139 (2009)
Issue (Month): 3 (June)
Pages: 263-272

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Handle: RePEc:kap:pubcho:v:139:y:2009:i:3:p:263-272
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  1. Acemoglu, Daron & Robinson, James A, 1999. "Inefficient Redistribution," CEPR Discussion Papers 2122, C.E.P.R. Discussion Papers.
  2. Kai A. Konrad, 2002. "Investment in the Absence of Property Rights: The Role of Incumbency Advantages," CESifo Working Paper Series 698, CESifo Group Munich.
  3. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  4. Nicolas Sahuguet & Nicola Persico, 2006. "Campaign spending regulation in a model of redistributive politics," Economic Theory, Springer, vol. 28(1), pages 95-124, 05.
  5. Baye, M. & Kovenock, D. & de Vries, C., 1990. "The All-Pay Auction with Complete Information," Discussion Paper 1990-51, Tilburg University, Center for Economic Research.
  6. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  7. Lien, Da-Hsiang Donald, 1990. "Corruption and allocation efficiency," Journal of Development Economics, Elsevier, vol. 33(1), pages 153-164, July.
  8. Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer, vol. 29(1), pages 1-24, September.
  9. Kovenock, Dan & Roberson, Brian, 2005. "Electoral poaching and party identification
    [Parteienzugehörigkeit und Wilderei beim Wahlgegner]
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2005-17, Social Science Research Center Berlin (WZB).
  10. Clark, Derek J. & Riis, Christian, 2000. "Allocation efficiency in a competitive bribery game," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 109-124, May.
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