Fairness and Redistribution

Alberto Alesina and George-Marios Angeletos

American Economic Review, 2005, vol. 95, issue 4, 960-980

Abstract: Different beliefs about the fairness of social competition and what determines income inequality influence the redistributive policy chosen in a society. But the composition of income in equilibrium depends on tax policies. We show how the interaction between social beliefs and welfare policies may lead to multiple equilibria or multiple steady states. If a society believes that individual effort determines income, and that all have a right to enjoy the fruits of their effort, it will choose low redistribution and low taxes. In equilibrium, effort will be high and the role of luck will be limited, in which case market outcomes will be relatively fair and social beliefs will be self-fulfilled. If, instead, a society believes that luck, birth, connections, and/or corruption determine wealth, it will levy high taxes, thus distorting allocations and making these beliefs self-sustained as well. These insights may help explain the cross-country variation in perceptions about income inequality and choices of redistributive policies.

Date: 2005
Note: DOI: 10.1257/0002828054825655
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (857)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/0002828054825655 (application/pdf)
http://www.aeaweb.org/aer/data/sept05_data_alesina.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Fairness and Redistribution (2005)
Working Paper: Fairness and Redistribution (2004)
Working Paper: Fairness and Redistribution (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:95:y:2005:i:4:p:960-980

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().