Beliefs and redistributive politics under incomplete information
Gabrieli, Tommaso (2007) Beliefs and redistributive politics under incomplete information. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.821).
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
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|
|Official Date:||September 2007|
|Number of Pages:||36|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
ALESINA, A., AND G.-M. ANGELETOS (2005): “Fairness and Redistribution: US versus Europe,” American Economic Review, 95, 960–980.
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