Social Mobility and the Demand for Redistribution : the POUM Hypothesis
This paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they, or their offspring, may make it up the income ladder. This "prospect of upward mobility" (POUM) hypothesis is shown to be fully compatible with rational expectations, and fundamentally linked to concavity in the mobility process. A steady-state majority could even be simultaneously poorer than average in terms of current income, and richer than average in terms of expected future incomes. A first empirical assessment suggests, on the other hand, that in recent U. S. data the POUM effect is probably dominated by the demand for social insurance. "In the future, everyone will be world-famous for fifteen minutes" [Andy Warhol 1968]. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology
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|Date of revision:||1999|
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