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Learning about the prospects for mobility: Economic and political dynamics following fundamental policy reform

John Morrow () and Michael Carter

Journal of Public Economics, 2017, vol. 155, issue C, 38-53

Abstract: The political left turn in Latin America, which lagged its transition to liberalized market economies by a decade or more, challenges conventional economic explanations of voting behavior. This paper generalizes the forward-looking voter model to a broad range of dynamic, possibly non-concave income processes. Under full information, the model implies support for redistributive policies materializes rapidly if few prospects of upward mobility are present. In contrast, modeling voters' evolving beliefs about an unknown income dynamic process shows a slow and polarizing shift toward redistributive preferences. Simulation using fitted income dynamics suggests that this imperfect information perspective accounts for Latin America's right-to-left political shift, and offers additional insights about political dynamics in the face of economic polarization.

Keywords: Income dynamics; Redistributive politics; Polarization; Bayesian learning; Latin America (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:pubeco:v:155:y:2017:i:c:p:38-53