A Political Economy Model of Earnings Mobility and Redistribution Policy

Ryo Arawatari and Tetsuo Ono

No 08-18-Rev.3, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper presents a politico-economic model that includes a mutual link between earnings mobility and redistributive politics. The model demonstrates that an economy attains a unique, unskilled-majority equilibrium where unskilled, lowincome agents support a low, rather than a high, redistribution when the economy is featured by a high opportunity of upward mobility and downward mobility risk. In contrast, the economy attains multiple equilibria when mobility opportunity and risk are low: one is an unskilled-majority equilibrium supporting high redistribution and the other is a skilled-majority equilibrium supporting low redistribution. Which equilibrium arises depends on the expectations of agents. The paper gives a comparison between the political equilibrium outcome and the social planner fs allocation in terms of mobility and redistribution policy.

Keywords: earnings mobility; political economy; redistribution (search for similar items in EconPapers)
JEL-codes: D30 D72 H20 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2008-04, Revised 2011-08
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: A Political Economy Model of Earnings Mobility and Redistribution Policy (2015)
Working Paper: A Political Economy Model of Earnings Mobility and Redistribution Policy (2012)
Working Paper: A Political Economy Model of Earnings Mobility and Redistribution Policy (2010)
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