Voting for immiserizing income redistribution in the Meltzer-Richard model

Richard Barnett, Joydeep Bhattacharya and Helle Bunzel

No 2012-15, School of Economics Working Paper Series from LeBow College of Business, Drexel University

Abstract: In the classic Meltzer and Richard (1981) model, the canonical model of income redistribution in democracies, voters, heterogeneous on the sole dimension of idiosyncratic productivity,evaluate an income redistributive program that pays everyone a lump-sum income subsidy financed by a distorting income tax levied on all. The political-equilibrium policy under majority rule is the tax rate most preferred (in a utility sense) by the median voter. The larger the gap between the median and mean income, the larger is the scale of income redistribution favored by the median voter. But does the median voter actually end up with more income post redistribution? We establish, somewhat ironically, that the median voter (and many poorer voters)in the Meltzer-Richard model may support income redistribution that leaves them poorer in income terms. Indeed, the basis for their support may not be more income but more leisure. The analysis spotlights the fact that transfer income, unlike labor income, requires no direct sacrifice of leisure.

Keywords: Meltzer-Richard model; income redistribution; voting equilibrium (search for similar items in EconPapers)
JEL-codes: H21 H23 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-11-01
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Persistent link: https://EconPapers.repec.org/RePEc:ris:drxlwp:2012_015

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