Paternalistic goods to improve income distribution: a political economy approach
In this article we show that when the provision of paternalistic goods is entwined with income distribution, the political decision process may prevent welfare maximisation. We model the decision process from a political economy perspective by assuming that the quantity of a paternalistic good to be produced, its regional distribution, and the equalisation grant are the result of a utilitarian bargaining process between a (relatively) rich Region and a poor one. Two cases are considered: a unitary and a federal State. The solution for a unitary State shows that First Best can be achieved only if the two Regions have the same bargaining power. In this case the level of income distribution is negatively correlated with the power of the rich Region. For a federal State we show that the result of the bargaining process always implies underprovision of the paternalistic good. Our model may explain the observed cross-national differences in the redistributive power of public policies.
|Date of creation:||Apr 2012|
|Date of revision:|
|Contact details of provider:|| Postal: University of Genoa c/o Marcello Montefiori via Vivaldi, 5 16126 Genova ITALY|
Fax: +39 010 209 5223
Web page: http://www.dep.unige.it/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:gea:wpaper:3/2012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcello Montefiori)
If references are entirely missing, you can add them using this form.