Paternalistic goods to improve income distribution: a political economy approach

Rosella Levaggi and Francesco Menoncin ()

No 3/2012, DEP - series of economic working papers from University of Genoa, Research Doctorate in Public Economics

Abstract: In this article we show that when the provision of paternalistic goods is entwined with income distribution, the political decision process may prevent welfare maximisation. We model the decision process from a political economy perspective by assuming that the quantity of a paternalistic good to be produced, its regional distribution, and the equalisation grant are the result of a utilitarian bargaining process between a (relatively) rich Region and a poor one. Two cases are considered: a unitary and a federal State. The solution for a unitary State shows that First Best can be achieved only if the two Regions have the same bargaining power. In this case the level of income distribution is negatively correlated with the power of the rich Region. For a federal State we show that the result of the bargaining process always implies underprovision of the paternalistic good. Our model may explain the observed cross-national differences in the redistributive power of public policies.

Keywords: Paternalistic Goods; Income Distribution (search for similar items in EconPapers)
JEL-codes: H77 I18 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-geo, nep-pol and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.dep.unige.it/RePEc/gea/wpaper/dwpo-3-apr2012.pdf Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.dep.unige.it:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
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:gea:wpaper:3/2012

Access Statistics for this paper

More papers in DEP - series of economic working papers from University of Genoa, Research Doctorate in Public Economics University of Genoa c/o Marcello Montefiori via Vivaldi, 5 16126 Genova ITALY. Contact information at EDIRC.
Bibliographic data for series maintained by Marcello Montefiori ().