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Electoral Uncertainty, Income Inequality and The Middle Class

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  • Anirban Mitra
  • Shabana Mitra

Abstract

We investigate how increased electoral competition — by influencing the equilibrium policies of competing parties — affects the income distribution in society. Our model is embedded in a standard probabilistic voting setup where parties compete at two stages: (i) they allocate resources across various districts and (ii) then, for each district, they divide the resources among the different constituent groups. We show that an increase in electoral competition in a district results in a tendency towards equalization of incomes therein. We check for these relationships using data from the Indian national elections which are combined with household-level consumption expenditure data rounds from NSSO (1987-88 and 2004-05) to yield a panel of Indian districts. We find that districts which have experienced tight elections exhibit lower inequality and polarization which indicates a larger "middle class".
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Suggested Citation

  • Anirban Mitra & Shabana Mitra, 2017. "Electoral Uncertainty, Income Inequality and The Middle Class," Economic Journal, Royal Economic Society, vol. 127(602), pages 1119-1152, June.
  • Handle: RePEc:wly:econjl:v:127:y:2017:i:602:p:1119-1152
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    File URL: http://hdl.handle.net/10.1111/ecoj.2017.127.issue-602
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    References listed on IDEAS

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    3. Arulampalam, Wiji & Dasgupta, Sugato & Dhillon, Amrita & Dutta, Bhaskar, 2009. "Electoral goals and center-state transfers: A theoretical model and empirical evidence from India," Journal of Development Economics, Elsevier, vol. 88(1), pages 103-119, January.
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    6. Timothy Besley & Torsten Persson & Daniel M. Sturm, 2010. "Political Competition, Policy and Growth: Theory and Evidence from the United States," CEP Discussion Papers dp1009, Centre for Economic Performance, LSE.
    7. repec:bla:econom:v:85:y:2018:i:338:p:266-280 is not listed on IDEAS
    8. James Foster & Michael Wolfson, 2010. "Polarization and the decline of the middle class: Canada and the U.S," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(2), pages 247-273, June.
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    Citations

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    Cited by:

    1. Ghosh, Sugata & Mitra, Anirban, 2016. "Ethnic Diversity, Public Spending and Political Regimes," MPRA Paper 75546, University Library of Munich, Germany.
    2. Hagemejer, Jan & Svejnar, Jan & Tyrowicz, Joanna, 2018. "Are Rushed Privatizations Substandard? Analyzing Firm-level Privatization under Fiscal Pressure," CEPR Discussion Papers 12991, C.E.P.R. Discussion Papers.
    3. Anirban Mitra & Shabana Mitra & Arnab Mukherji, 2017. "Cash for Votes: Evidence from India," Studies in Economics 1711, School of Economics, University of Kent.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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