The Political Economy of Redistribution under Democracy

Adam Przeworski and Jess Benhabib

No 58, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: We ask what redistributions of income and assets are feasible in a democracy, given the initial assets and their distribution. The question is motivated by the possibility that if redistribution is insufficient for the poor or excessive for the rich, they may turn against democracy. In turn, if no redistribution simultaneously satisfies the poor and the wealthy, democracy cannot be sustained. Hence, the corollary question concerns the conditions under which democracy is sustainable. Since decisions to save are endogenous, we solve explicitly for the current growth rates given any time path of future tax rates. We find that the optimal path of redistribution chosen by the median voter under the constraint of rebellion by the poor or the wealthy consists of redistributing as much as possible as soon as possible. However, this path is time inconsistent unless voters punish governments that deviate from their promises. Democracies survive in wealthy societies, with a lower average capital stock when they are more equal.

Keywords: Sustainable Democracy; Optimal Taxes (search for similar items in EconPapers)
JEL-codes: H0 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.econ.nyu.edu/user/benhabib/dg103.pdf main text (application/pdf)

Related works:
Journal Article: The political economy of redistribution under democracy (2006)
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:red:sed004:58

Access Statistics for this paper

More papers in 2004 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().