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The Political Economy of In-Kind Redistribution

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  • Lopez-Rodriguez, David

Abstract

Why do politicians redistribute resources through in-kind rather than cash transfers? This paper examines political incentives for in-kind government redistribution. By analyzing the political game between o¢ ce-motivated politicians and self-interested citizens, I �rst show that in economies with competitive markets in-kind transfers are not required. Politicians can win elections targeting groups of voters with differential cash transfers. However, in-kind transfers arise in the presence of externalities in consumption. In that case, targeting groups of voters with in-kind rather than cash transfers allows politicians to attract simultaneously voters in additional groups with the same amount of resources. Politicians undertake political redistribution depending on the expected electoral returns obtained from targeting both cash and in-kind transfers into di¤erent groups. Furthermore, electoral competition leads the economy to achieve Pareto efficient allocations that markets cannot reach. Politicians internalize the presence of external effects when competing for marginal voters who could swing their vote.

Suggested Citation

  • Lopez-Rodriguez, David, 2011. "The Political Economy of In-Kind Redistribution," MPRA Paper 44152, University Library of Munich, Germany, revised 2012.
  • Handle: RePEc:pra:mprapa:44152
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    File URL: https://mpra.ub.uni-muenchen.de/44152/1/MPRA_paper_44152.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gentilini,Ugo, 2016. "The revival of the"cash versus food"debate : new evidence for an old quandary ?," Policy Research Working Paper Series 7584, The World Bank.
    2. Lopez-Rodriguez, David, 2011. "The scope of political redistribution with proportional income taxation," MPRA Paper 44150, University Library of Munich, Germany, revised 2012.
    3. Gentilini, Ugo, 2014. "Our daily bread : what is the evidence on comparing cash versus food transfers?," Social Protection and Labor Policy and Technical Notes 89502, The World Bank.

    More about this item

    Keywords

    in-kind transfers; political redistribution; efficient democracy;

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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