Redistributive Politics and Market Efficiency: An Experimental Study

Jens GroЯer and Ernesto Reuben
Authors registered in the RePEc Author Service: Jens Grosser ()

No 44, Working Paper Series in Economics from University of Cologne, Department of Economics

Abstract: We study the interaction between competitive markets that produce large but unequally distributed welfare gains and elections through which the poor majority can redistribute income away from the rich minority. In our simple laboratory democracy, subjects first earn their income by trading in a double auction market and thereafter vote on redistributive policies in two-candidate elections. In addition, in one of the treatments subjects can attempt to influence the candidates’ policy choices by transferring money to them. We observe very high levels of redistribution - even when transfers to candidates are possible - with little effect on market efficiency. Overall, the experimental results are explained by our equilibrium predictions.

Date: 2009-11-12
New Economics Papers: this item is included in nep-exp, nep-ltv and nep-pol
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Redistribution and market efficiency: An experimental study (2013)
Working Paper: Redistributive Politics and Market Efficiency: An Experimental Study (2009)
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