Electoral Uncertainty, Income Inequality and The Middle Class

Abstract

We investigate how increased electoral competition -by influencing the equilibrium policies of competing parties -affects the income distribution in society. Our model is embedded in a standard probabilistic voting setup where parties compete at two stages: (i) they allocate resources across various districts and (ii) then, for each district, they divide the resources among the different constituent groups. We show that an increase in electoral competition in a district results in a tendency towards equalization of incomes therein. We check for these relationships using data from the Indian national elections which are combined with household-level consumption expenditure data rounds from NSSO (1987-88 and 2004-05) to yield a panel of Indian districts. We find that districts which have experienced tight elections exhibit lower inequality and polarization which indicates a larger "middle class".JEL codes: D72, D78, O20

Macroeconomic, Income Inequality, and Poverty Relationship: A Review of Research Perspectives

“…Mitra and Mitra (2017) explore how electoral competition—by influencing the policies of contending parties—influences the income inequality in society. In their model, the political parties can commit to some levels of investment in three different kinds of public goods: (a) one that disproportionately benefits the poor, (b) another that disproportionately benefits the rich, and (c) finally, a pure public good that benefits all groups equally.…”

Measuring Electoral Competitiveness: With Application to the Indian States

“…Here an election is seen as highly competitive if the actual first versus second place vote share margin, 7 + − 7 ( , is 'small', where 7 , is the vote share of candidate or party i. For example, Chhibber and Nooruddin (2000), Wilkinson (2004), Arulampalam et al (2009), Crost and Kambhampati (2010), Banerjee and Iyer (2010), Sáez and Sinha (2010), Jha (2014), Dash and Mukherjee (2015), Afridi et al (2016), and Mitra and Mitra (2017) all use the winning margin in their work. 17…”

“…4 See, for example,Holbrook and Van Dunk (1993),Rogers and Rogers (2000),Blais and Lago (2009),Grofman and Selb (2009) andKayser and Lindstädt (2014). Applications to India includeBanerjee and Somanathan (2007),Banerjee and Iyer (2010),Dash and Mukherjee (2015),Afridi et al (2016) andMitra and Mitra (2017). 5 See, for example, SeeRiker and Ordeshook (1973),Elkins (1974),Persson and Tabellini (2000, chapter 8),Johnston et al (2012), andBarkovic-Parsons et al (2017).…”

Healthcare investment and income inequality

“…In addition, our IV (private to public ratio of vaccine provision) could be potentially correlated with the error term in equation (17) due to a correlation between the IV and disability. More specifically, the IV may be correlated with disability and hence earnings and earnings inequality.…”