Political Economy of Redistribution

Konstantin Sonin, Georgy Egorov and Daniel Diermeier

No 11285, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: It is often argued that additional constraints on redistribution such as granting veto power to more players in the society makes property better protected from expropriation. We use a legislative bargaining-type model to demonstrate that this intuition may be ‡flawed. Increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property rights protection. One is formal constraints that allow individuals or groups to block any redistribution that is not in their favor. The other occurs in equilibrium where players without such powers protect each other from redistribution. Players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their infl‡uence to prevent redistributions. In a stable allocation, the society exhibits a “"class" ”structure with class members having equal wealth, and strategically protecting each other from redistribution.

Keywords: Political economy; Legislative bargaining; Property rights; Institutions (search for similar items in EconPapers)
JEL-codes: D72 D74 P48 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-cdm, nep-mic and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Political Economy of Redistribution (2017)
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