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Efficiency, Welfare, and Political Competition

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  • Felix J. Bierbrauer
  • Pierre C. Boyer

Abstract

We study political competition in an environment in which voters have private information about their preferences. Our framework covers models of income taxation, public-goods provision, or publicly provided private goods. Politicians are vote-share maximizers. They can propose any policy that is resource-feasible and incentive-compatible. They can also offer special favors to subsets of the electorate. We prove two main results. First, the unique symmetric equilibrium is such that policies are surplus-maximizing and hence first-best Pareto-efficient. Second, there is a surplus-maximizing policy that wins a majority against any welfare-maximizing policy. Thus, in our model, policies that trade off equity and efficiency considerations are politically infeasible. JEL Codes: C72, D72, D82, H21, H41, H42.

Suggested Citation

  • Felix J. Bierbrauer & Pierre C. Boyer, 2016. "Efficiency, Welfare, and Political Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 131(1), pages 461-518.
  • Handle: RePEc:oup:qjecon:v:131:y:2016:i:1:p:461-518.
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    File URL: http://hdl.handle.net/10.1093/qje/qjv033
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    3. Dan Kovenock & Brian Roberson & Roman M. Sheremeta, 2019. "The attack and defense of weakest-link networks," Public Choice, Springer, vol. 179(3), pages 175-194, June.
    4. Sala, Hector, 2019. "A fresh look at fiscal redistribution and inequality in the US across electoral cycles," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 81(C), pages 195-206.
    5. Boyer, Pierre C. & Koriyama, Yukio & Schulte, Elisabeth, 2016. "Legitimacy of mechanisms for public good provision," Economics Letters, Elsevier, vol. 146(C), pages 120-122.
    6. Bowen, T. Renee & Chen, Ying & Eraslan, Hülya & Zápal, Jan, 2017. "Efficiency of flexible budgetary institutions," Journal of Economic Theory, Elsevier, vol. 167(C), pages 148-176.
    7. Esslinger, Christoph & Boyer, Pierre, 2015. "Public debt and the political economy of reforms," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113107, Verein für Socialpolitik / German Economic Association.
    8. David Madden & Michael Savage, 2020. "Which households matter most? Capturing equity considerations in tax reform via generalised social marginal welfare weights," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(1), pages 153-193, February.
    9. Boyer, Pierre C. & Kempf, Hubert, 2020. "Regulatory arbitrage and the efficiency of banking regulation," Journal of Financial Intermediation, Elsevier, vol. 41(C).
    10. Bierbrauer Felix J., 2016. "Effizienz oder Gerechtigkeit?," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 17(1), pages 2-24, April.
    11. Jacobs, Bas & Jongen, Egbert L.W. & Zoutman, Floris T., 2017. "Revealed social preferences of Dutch political parties," Journal of Public Economics, Elsevier, vol. 156(C), pages 81-100.
    12. Felix Bierbrauer, 2016. "Effizienz oder Gerechtigkeit? Ungleiche Einkommen, ungleiche Vermögen und die Theorie der optimalen Besteuerung," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2016_03, Max Planck Institute for Research on Collective Goods.
    13. Eguia, Jon X. & Nicolo, Antonio, 2019. "Information and targeted spending," Theoretical Economics, Econometric Society, vol. 14(2), May.
    14. 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.
    15. Khan, M. Ali & Qiao, Lei & Rath, Kali P. & Sun, Yeneng, 2020. "Modeling large societies: Why countable additivity is necessary," Journal of Economic Theory, Elsevier, vol. 189(C).

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    More about this item

    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
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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