Paper #603

Títol:

The survival of the welfare state

Autors:

John Hassler, José V. Rodríguez Mora, Kjetil Storesletten i Fabrizio Zilibotti

Data:

Desembre 2001

Resum:

This paper provides an analytical characterization of Markov perfect equilibria in a politico-economic model with repeated voting, where agents vote over distortionary income redistribution. The key feature of the theory is that the future constituency of redistributive policies depends positively on the current level of redistribution, since this affects both private investments and the future distribution of voters. Agents vote rationally and fullly anticipate the effects of their political choice on both private incentives and future voting outcomes. The model features multiple equilibria. In "pro-welfare" equilibria, both welfare state policies and their effects on distribution persist forever. In "anti-welfare equilibria", even a majority of beneficiaries of redistributive policies vote strategically so as to induce the formation of a future majority that will vote for zero redistribution.

Paraules clau:

repeated voting, Markov equilibrium, multiple equilibria, welfare state, redistribution, political economy, policy persistence, wage inequality, education

Codis JEL:

D72, E62, H11, H31, P16

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

American Economic Review, 93 (2003), 1, pp. 87-112

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