Gabrieli, Tommaso (2007) Beliefs and redistributive politics under incomplete information. Working Paper. University of Warwick, Department of Economics, Coventry.

Preview

PDF WRAP_Gabrielli_twerp_821.pdf - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader Download (271Kb)

Abstract

The reason why the social contract is so different in two otherwise comparable societies like the United States and continental Western European countries represents a challenging question. Large empirical evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. I present a model of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently from the recent literature which obtains multiple equilibria by modeling agents characterized by psychological biases, my model is based on standard assumptions. Multiple equilibria originate from multiple optimal levels of information for the society. Multiple optimal levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework allows the analysis of various comparative statics in order to answer to policy questions.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HB Economic Theory J Political Science > JC Political theory
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Welfare economics, Social contract, Distribution (Economic theory), Distributive justice, Information asymmetry
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	September 2007
Number:	No.821
Number of Pages:	36
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
References:	ALESINA, A., AND G.-M. ANGELETOS (2005): “Fairness and Redistribution: US versus Europe,” American Economic Review, 95, 960–980. ALESINA, A., AND E. GLAESER (2004): Fighting Poverty in the US and Europe: A World of Difference. Oxford University Press, Oxford, UK. ALESINA, A., E. GLAESER, AND B. SACERDOTE (2001): “Why Doesn’t the US Have a European-Type Welfare State?,” Brookings Papers on Economic Activity, 2, 187–277. BENABOU, R., AND J. TIROLE (2006): “Belief in a JustWorld and Redistributive Politics,” Quarterly Journal of Economics, 121, 699–746. BISHOP, J. H. (1996): Signaling, Incentives, and School Organization in France, the Netherlands, Britain, and the United States. In: Hanushek E. A. and D.W. Jorgenson, eds., Improving America’s Schools: The Role of Incentives.chap. 7, pp. 111–146. National Academy Press, Washington DC. CERVELLATI, M., J. ESTEBAN, AND L. KRANICH (2006): “Redistributive Taxation with Endogenous Sentiments,” IZA Discussion Papers 2312, Institute for the Study of Labor (IZA). KEELY, L. C. (2002): “Mobility and Fertility,” University of Wisconsin-Madison, mimeo. LADD, E., AND K. BOWMAN (1998): Attitudes Towards Economic Inequality. American Enterprise Institute Studies on Understanding Economic Inequality, Washington, DC. MELTZER, A. H., AND S. F. RICHARD (1981): “A Rational Theory of the Size of Government,” Journal of Political Economy, 89, 914–927. PIKETTY, T. (1995): “Social Mobility and Redistributive Politics,” Quarterly Journal of Economics, 110, 551–584.
URI:	http://wrap.warwick.ac.uk/id/eprint/1395

Request changes to a record

Actions (login required)

View Item