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Deceptive Redistribution

  • Guillermo L. Ordoñez

    (Yale University)

  • Simeon D. Alder

    (University of Notre Dame)

While economic and redistributive policies can be welfare enhancing in an environment characterized by market failures and inequality, they frequently generate private gains to those who hold public office. In a setting with dispersed information about the policies' true motives we ask how self-interested governments who fret over their perceived integrity (reputation) balance legitimate needs for government action with the temptations of rent-seeking. Compared to the previous literature our model generates a richer trade-off structure between redistribution and efficiency. We find that governments use transfers strategically to conceal inefficient policy choices and excessive office rents. Our model also offers novel economic insights into the role of information frictions in shaping the governments' political accountability.

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File URL: https://economicdynamics.org/meetpapers/2011/paper_1140.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1140.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1140
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  2. Lee J. Alston & Gary D. Libecap & Bernardo Mueller, 2010. "Interest Groups, Information Manipulation in the Media, and Public Policy: The Case of the Landless Peasants Movement in Brazil," NBER Working Papers 15865, National Bureau of Economic Research, Inc.
  3. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
  4. Timothy Besley & Andrea Prat, 2006. "Handcuffs for the Grabbing Hand? Media Capture and Government Accountability," American Economic Review, American Economic Association, vol. 96(3), pages 720-736, June.
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  6. Marco Manacorda & Edward Miguel & Andrea Vigorito, 2009. "Government transfers and political support," LSE Research Online Documents on Economics 28519, London School of Economics and Political Science, LSE Library.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  8. James D. Fearon, 2011. "Self-Enforcing Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 126(4), pages 1661-1708.
  9. Pierre Yared, 2010. "Politicians, Taxes and Debt," Review of Economic Studies, Oxford University Press, vol. 77(2), pages 806-840.
  10. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  11. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954, December.
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