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Aggregate uncertainty, political instability and redistribution


  • G. Bellettini


This paper associates political instability to real shocks affecting the income of the median voter, in a two-period model where two political parties set redistribution in order to defend the interests of well-de¯ned constituencies. Implemented policies affect future voting outcomes and an intertemporal trade-off arises for the parties since their optimal one-period strategy does not maximize the probability of being reelected. The higher the volatility of the real shock, the more likely that parties deviate from the optimal one-period strategy by choosing a conservative strategy, which increases their chances of reelection and the expected lifetime utility of their constituencies.

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  • G. Bellettini, 1995. "Aggregate uncertainty, political instability and redistribution," Working Papers 213, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:213

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    References listed on IDEAS

    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-1198, December.
    2. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    3. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    4. Tabellini, Guido & Alesina, Alberto, 1990. "Voting on the Budget Deficit," American Economic Review, American Economic Association, vol. 80(1), pages 37-49, March.
    5. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    6. John Roemer, 1994. "On the relationship between economic development and political democracy," Review of Economic Design, Springer;Society for Economic Design, vol. 1(1), pages 15-39, December.
    7. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    8. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," Review of Economic Studies, Oxford University Press, vol. 60(4), pages 755-776.
    9. Alesina, Alberto & Tabellini, Guido, 1989. "External debt, capital flight and political risk," Journal of International Economics, Elsevier, vol. 27(3-4), pages 199-220, November.
    10. Martin J. Osborne & Al Slivinski, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 65-96.
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