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Inequality and size of the government when voters have other regarding preferences


  • Sanjit Dhami


  • Ali al-Nowaihi



The celebrated relation between inequality and redistribution is based on selfish voters who care solely about own-payoffs. A growing empirical literature highlights the importance of other regarding preferences (ORP) in voting over redistribution. We reexamine the relation between inequality and redistribution, within a simple general equilibrium model, when voters have ORP. Our contribution is five-fold. First, we demonstrate the existence of a Condorcet winner. Second, poverty can lead to increased redistribution (which implies a countercyclical social spending to GDP ratio). Third, we show that disposable income 'strongly median-dominates' factor income. Fourth, we show that fair voters respond to an increase in 'strong median-dominance' by engaging in greater redistribution. Fifth, an illustrative empirical exercise using OECD data points to the importance of fairness in explaining redistribution.

Suggested Citation

  • Sanjit Dhami & Ali al-Nowaihi, 2008. "Inequality and size of the government when voters have other regarding preferences," Discussion Papers in Economics 08/23, Department of Economics, University of Leicester.
  • Handle: RePEc:lec:leecon:08/23

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    References listed on IDEAS

    1. Tyran, Jean-Robert & Sausgruber, Rupert, 2006. "A little fairness may induce a lot of redistribution in democracy," European Economic Review, Elsevier, vol. 50(2), pages 469-485, February.
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    More about this item


    Redistribution; Other regarding preferences; Single crossing property; Income inequality; Difference dominance; Median dominance; American Exceptionalism.;

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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