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Aspirations and the Political Economy of Inequality

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  • Timothy Besley

Abstract

In standard approaches to the political economy of inequality, the income distribution and the preferences of households are taken as fixed when studying how incomes are determined within and between nations. This paper makes the income distribution endogenous by supposing that aspirational parents can socialize children into having aspirational preferences which are modeled as a reference point in income space. The model looks at the endogenous determination of the level of income, income inequality and income redistribution where the proportion of aspirational individuals evolves endogenously according to payoffs along the equilibrium path. The paper discusses implications of the model for intergenerational mobility. It also shows how the income generation process is critical for the dynamics and welfare conclusions. Finally, it looks at some evidence from the World Values Survey in light of the theory.

Suggested Citation

  • Timothy Besley, 2016. "Aspirations and the Political Economy of Inequality," STICERD - Public Economics Programme Discussion Papers 28, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  • Handle: RePEc:cep:stippp:28
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    File URL: http://sticerd.lse.ac.uk/dps/pep/pep28.pdf
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    References listed on IDEAS

    as
    1. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
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    4. Michael Kremer, 1997. "How Much does Sorting Increase Inequality?," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 115-139.
    5. Maria Saez-Marti & Fabrizio Zilibotti, 2008. "Preferences as Human Capital: Rational Choice Theories of Endogenous Preferences and Socioeconomic Changes," Finnish Economic Papers, Finnish Economic Association, vol. 21(2), pages 81-94, Autumn.
    6. Timur Kuran & William H. Sandholm, 2008. "Cultural Integration and Its Discontents," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 201-228.
    7. Raquel Fernández & Richard Rogerson, 2001. "Sorting and Long-Run Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1305-1341.
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    13. Ticchi, Davide & Verdier, Thierry & Vindigni, Andrea, 2013. "Democracy, Dictatorship and the Cultural Transmission of Political Values," POLIS Working Papers 171, Institute of Public Policy and Public Choice - POLIS.
    14. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Aspirations and the Political Economy of Inequality
      by maximorossi in NEP-LTV blog on 2016-09-06 01:15:34

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    Cited by:

    1. Karen Macours & Renos Vakis, 2017. "Sustaining Impacts When Transfers End: Women Leaders, Aspirations, and Investments in Children," NBER Chapters,in: The Economics of Poverty Traps, pages 325-355 National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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