Fiscal redistribution around elections when democracy is not “the only game in town”

Pantelis Kammas () and Vassilis Sarantides

No 2015019, Working Papers from The University of Sheffield, Department of Economics

Abstract: This paper examines whether policy intervention around elections affects income inequality and actual fiscal redistribution. We first develop a simplified theoretical framework which allows us to examine fiscal redistribution around elections when democracy is not “the only game in town” and there is a threat of revolution from some groups of agents. Subsequently, employing data for a panel of 65 developed and developing countries during the period of 1975-2010, we provide robust empirical evidence of electoral cycles on income inequality and actual fiscal redistribution in countries characterized as new democracies. Moreover, our analysis suggests that this effect is mainly driven by a political instability channel which induces incumbents to redistribute resources - through fiscal policy - towards the poorer segments of the society in order to convince them that “democracy works”. In contrast, inequality and actual fiscal redistribution are not affected by elections in countries characterized as established democracies.

Keywords: elections; new democracy; redistribution; income inequality (search for similar items in EconPapers)
JEL-codes: D63 D72 E62 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2015-09
New Economics Papers: this item is included in nep-cdm, nep-mac and nep-pol
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http://www.sheffield.ac.uk/economics/research/serps/articles/2015_019 First version, September 2015 (application/pdf)

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Journal Article: Fiscal redistribution around elections when democracy is not “the only game in town” (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2015019

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