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The Political Economy of Redistribution Under Asymmetric Information

  • Sanjit Dhami

    (University of Newcastle Upon Tyne)

This paper examines the political economy of redistribution when voters have asymmetric information about the redistributive preferences of politicians and the latter cannot make credible policy commitments. The candidates in each party are endogenously selected by a process of Nash Bargaining between the competing factions. In equilibrium, there is "partial convergence" of redistributive policies, support for "Director's Law", the possibility of "policy reversals" across the parties, and "inter term tax variability" (political budget cycles) during the tenure of a politician. The effect of inequality on the magnitude of the redistributive activity depends in important ways on the incentives and constraints facing politicians.

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Paper provided by EconWPA in its series Game Theory and Information with number 0108001.

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Length: 29 pages
Date of creation: 16 Aug 2001
Date of revision:
Handle: RePEc:wpa:wuwpga:0108001
Note: Type of Document - Postscript; prepared on PC; to print on PostScript; pages: 29 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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  9. repec:cup:cbooks:9780521576475 is not listed on IDEAS
  10. John Roemer, 2003. "The Democratic Political Economy Of Progressive Income Taxation," Working Papers 9711, University of California, Davis, Department of Economics.
  11. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
  12. Avinash Dixit & John Londregan, 1998. "Ideology, Tactics, And Efficiency In Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 497-529, May.
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  18. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  19. Dixit, Avinash K & Londregan, John, 1994. "Redistributive Politics and Economic Efficiency," CEPR Discussion Papers 1056, C.E.P.R. Discussion Papers.
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