The Political Economy of Redistribution Under Asymmetric Information

Sanjit Dhami ()

Game Theory and Information from EconWPA

Abstract: 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.

Keywords: Signaling; Inequality; Redistribution; Political Business Cycles (search for similar items in EconPapers)
JEL-codes: D72 D78 D82 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-pub
Date: 2001-08-16
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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Related works:
Journal Article: The political economy of redistribution under asymmetric information (2003)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0108001

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