A Political Economy Model of Earnings Mobility and Redistribution Policy

Abstract

This paper presents a politico-economic model that includes a mutual link between life cycle earnings mobility and redistributive politics. The model demonstrates that when an economy features a high opportunity of upward mobility and high risk of downward mobility, it attains a unique equilibrium where unskilled, low-income agents support a low redistribution because of the hope of upward mobility in future. In contrast, the economy attains multiple equilibria when mobility opportunity and risk are low: one is an unskilled-majority equilibrium defined by low mobility and the other is a skilled-majority equilibrium defined by high mobility. The paper gives a comparison between the political equilibrium and the social planner's allocation in terms of mobility, and shows that the skilled-majority equilibrium realizes mobility close to the optimal one.

A New “Consumption-production” Market Model

“…However, since entering the information age, the information, prices and characteristics of goods and services are no longer the exclusive monopoly of producers [3] . At present, the world's overproduction, with the continuous upgrading of the entire consumer market, the future market competition will further return to consumer factors.…”