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Inefficient Redistribution and Inefficient Redistributive Politics

  • Dan Kovenock
  • Brian Roberson

This paper examines the effect of inefficient redistribution in Myerson’s (1993) model of redistributive politics. Regardless of the absolute levels of the efficiency of political parties’ transfers to different voter segments, parties have incentive to (stochastically) shift resources away from voter segments with large relative efficiency gaps between the two parties’ transfers towards voter segments with smaller relative efficiency gaps. Because of this dependence on relative, and not absolute, levels of efficiency, the parties’ optimal strategies may lead to large discrepancies between the sum of the budgetary transfers and the sum of the effective transfers. At the extreme, in the spirit of Magee, Brock, and Young (1989), we obtain “black hole” inefficiency. When the model is extended to allow for loyal voter segments and loyalty to a party is positively related to the efficiency of that party’s transfers to the segment, the incentives leading to black hole inefficiency become even stronger.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1206.

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Length: 11 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:pur:prukra:1206
Contact details of provider: Postal: Krannert Building, West Lafayette, IN 47907
Web page: http://www.krannert.purdue.edu/programs/phd

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  1. Arye L. Hillman & John G. Riley, 1989. "Politically Contestable Rents And Transfers," Economics and Politics, Wiley Blackwell, vol. 1(1), pages 17-39, 03.
  2. Clark, Derek J. & Riis, Christian, 2000. "Allocation efficiency in a competitive bribery game," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 109-124, May.
  3. Baye, M.R. & Kovenock, D. & De Vries, C., 1992. "The All-Pay Auction with Complete Information," Papers 8-92-1, Pennsylvania State - Department of Economics.
  4. Dan Kovenock & Brian Roberson, 2008. "Electoral Poaching and Party Identification," Journal of Theoretical Politics, , vol. 20(3), pages 275-302, July.
  5. Konrad, Kai A., 2001. "Investment in the absence of property rights: the role of incumbency advantages
    [Investitionsanreize bei unvollständigen Eigentumsrechten: die Rolle von Asymmetrien in Aneignungskonflikten]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-18, Social Science Research Center Berlin (WZB).
  6. Nicolas Sahuguet & Nicola Persico, 2006. "Campaign spending regulation in a model of redistributive politics," Economic Theory, Springer, vol. 28(1), pages 95-124, 05.
  7. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  8. Acemoglu, Daron & Robinson, James A, 1999. "Inefficient Redistribution," CEPR Discussion Papers 2122, C.E.P.R. Discussion Papers.
  9. Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer, vol. 29(1), pages 1-24, September.
  10. Lien, Da-Hsiang Donald, 1990. "Corruption and allocation efficiency," Journal of Development Economics, Elsevier, vol. 33(1), pages 153-164, July.
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