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Income Inequality, Mobility, and the Welfare State: A Political Economy Model

Author

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  • Bossi, Luca

    () (University of Pennsylvania)

  • Gumus, Gulcin

    () (Florida Atlantic University)

Abstract

In this paper, we set up a three-period stochastic overlapping generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.

Suggested Citation

  • Bossi, Luca & Gumus, Gulcin, 2011. "Income Inequality, Mobility, and the Welfare State: A Political Economy Model," IZA Discussion Papers 5909, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5909
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    Cited by:

    1. repec:spr:soinre:v:134:y:2017:i:3:d:10.1007_s11205-016-1465-4 is not listed on IDEAS
    2. Torben M. Andersen & Joydeep Bhattacharya, 2013. "The Intergenerational Welfare State," CESifo Working Paper Series 4359, CESifo Group Munich.
    3. Dragomirescu-Gaina, Catalin & Freitas, Maria, 2017. "The social and economic preferences of a tech-savvy generation," MPRA Paper 84232, University Library of Munich, Germany.

    More about this item

    Keywords

    inequality; redistribution; structure induced equilibrium; mobility;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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