IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

A Second Chance at Success: A Political Economy Perspective

  • Ryo Arawatari


    (Graduate School of Economics, Osaka University)

  • Tetsuo Ono


    (Graduate School of Economics, Osaka University)

This paper characterizes a stationary Markov-perfect political equilibrium where agents vote over income taxation that distorts educational investment. Agents become rich or poor through educational investment, and the poor have a second chance at success. The results show the following concerning the cost of a second chance. First, when the cost is low, the economy is characterized by high levels of upward mobility and inequality, and a low tax burden supported by the poor with prospects for upward mobility. Second, when the cost is high, there are multiple equilibria with various patterns of upward mobility, inequality and redistribution. Numerical examples show that the shift from a high-cost economy to a low-cost economy may reduce social welfare.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 08-04-Rev.

in new window

Length: 47 pages
Date of creation: Jan 2008
Date of revision: Jul 2008
Handle: RePEc:osk:wpaper:0804r
Contact details of provider: Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Glomm, Gerhard & Ravikumar, B., 1996. "Endogenous public policy and multiple equilibria," European Journal of Political Economy, Elsevier, vol. 11(4), pages 653-662, April.
  2. Quadrini, Vincenzo, 1999. "Growth, learning and redistributive policies," Journal of Public Economics, Elsevier, vol. 74(2), pages 263-297, November.
  3. Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2007. "Democratic public good provision," Journal of Economic Theory, Elsevier, vol. 133(1), pages 127-151, March.
  4. Bénabou, Roland & Ok, Efe A, 1998. "Social Mobility and the Demand for Redistribution: the POUM Hypothesis," CEPR Discussion Papers 1955, C.E.P.R. Discussion Papers.
  5. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
  6. Kristov, L. & Lindert, P. & Mcclelland, R., 1990. "Pressure Groups And Redistribution," Papers 66, California Davis - Institute of Governmental Affairs.
  7. Marco Bassetto, 1999. "Political economy of taxation in an overlapping-generations economy," Discussion Paper / Institute for Empirical Macroeconomics 133, Federal Reserve Bank of Minneapolis.
  8. Gene M. Grossman & Elhanan Helpman, 1996. "Intergenerational Redistribution with Short-Lived Governments," NBER Working Papers 5447, National Bureau of Economic Research, Inc.
  9. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  10. Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent-Seeking," Economics and Politics, Wiley Blackwell, vol. 16, pages 287-320, November.
  11. Aaberge, Rolf, et al, 2002. "Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(4), pages 443-69, December.
  12. repec:ebl:ecbull:v:4:y:2008:i:13:p:1-13 is not listed on IDEAS
  13. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  14. Jarvis, Sarah & Jenkins, Stephen P, 1998. "How Much Income Mobility Is There in Britain?," Economic Journal, Royal Economic Society, vol. 108(447), pages 428-43, March.
  15. Hassler, John & Rodríguez Mora, José Vicente & Zeira, Joseph, 2000. "Inequality and Mobility," CEPR Discussion Papers 2497, C.E.P.R. Discussion Papers.
  16. Ryo Arawatari & Tetsuo Ono, 2007. "Dynamic Political Economy of Redistribution Policy: The Role of Education Costs," Discussion Papers in Economics and Business 07-31-Rev, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Nov 2007.
  17. Ryo Arawatari & Tetsuo Ono, 2008. "A Second Chance at Success: A Political Economy Perspective?," Discussion Papers in Economics and Business 08-04, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  18. Alberto Alesina & Eliana La Ferrara, 2001. "Preferences for Redistribution in the Land of Opportunities," NBER Working Papers 8267, National Bureau of Economic Research, Inc.
  19. Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October.
  20. Azariadis, Costas & Galasso, Vincenzo, 2002. "Fiscal Constitutions," Journal of Economic Theory, Elsevier, vol. 103(2), pages 255-281, April.
  21. Lorenzo Forni, 2005. "Social Security as Markov Equilibrium in OLG Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 178-194, January.
  22. La Ferrara, Eliana & Alesina, Alberto, 2005. "Preferences for Redistribution in the Land of Opportunities," Scholarly Articles 4552533, Harvard University Department of Economics.
  23. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  24. Saint Paul, Gilles & Verdier, Thierry, 1997. " Power, Distributive Conflicts, and Multiple Growth Paths," Journal of Economic Growth, Springer, vol. 2(2), pages 155-68, July.
  25. Martin Gonzalez-Eiras & Dirk Niepelt, 2007. "The Future of Social Security," Working Papers 07.02, Swiss National Bank, Study Center Gerzensee.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:osk:wpaper:0804r. 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: (Atsuko SUZUKI)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.