Paper #603

Título:

The survival of the welfare state

Autores:

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

Fecha:

Diciembre 2001

Resumen:

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.

Palabras clave:

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

Códigos JEL:

D72, E62, H11, H31, P16

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

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

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