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Social Mobility and the Demand for Redistribution: The POUM Hypothesis

Author

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  • Benabou, R.
  • Ok, E.A.

Abstract

Even people with income below average will not support high rates of redistribution, because of the prospect of upward mobility: they take into account the fact the they, or their children, may move up in the income distribution, and therefore be hurt by high tax rates. This "intuitive" hypothesis is commonly advanced as part of the explanation for why democracies, where a relatively poor majority holds the political power, do not engage in large-scale expropriation and redistribution. But does it make sense, or does it require that some of the poor overemphasize the prospects of good outcomes relative to bad ones, due either to irrationally optimistic expectations or to a form of risk-loving?

Suggested Citation

  • Benabou, R. & Ok, E.A., 1998. "Social Mobility and the Demand for Redistribution: The POUM Hypothesis," Working Papers 98-23, C.V. Starr Center for Applied Economics, New York University.
    • Handle: RePEc:cvs:starer:98-23
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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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