Redistributive Politics and Market Efficiency: An Experimental Study

Jens Grosser () and Ernesto Reuben

No 4549, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study the interaction between competitive markets that produce large but unequally distributed welfare gains and elections through which the poor majority can redistribute income away from the rich minority. In our simple laboratory democracy, subjects first earn their income by trading in a double auction market and thereafter vote on redistributive policies in two-candidate elections. In addition, in one of the treatments subjects can attempt to influence the candidates’ policy choices by transferring money to them. We observe very high levels of redistribution – even when transfers to candidates are possible – with little effect on market efficiency. Overall, the experimental results are explained by our equilibrium predictions.

Keywords: lobbying; redistribution; double auction; elections (search for similar items in EconPapers)
JEL-codes: D41 D72 D73 H23 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2009-11
New Economics Papers: this item is included in nep-exp, nep-pol and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published - published in: Journal of Public Economics, 2013, 101, 39-52

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Related works:
Journal Article: Redistribution and market efficiency: An experimental study (2013)
Working Paper: Redistributive Politics and Market Efficiency: An Experimental Study (2009)
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