Income Inequality, Mobility, and the Welfare State: A Political Economy Model

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. In this paper, we set up a three-period stochastic overlapping generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.JEL Classification: D72, H53, H55

Welfare State Development, Individual Deprivations and Income Inequality: A Cross-Country Analysis in Latin America and the Caribbean

“…According to Bossi et al (2013Bossi et al ( : 1199, there are multiplicities of programs under the welfare state in high-income industrialized countries that promotes redistribution and provides social insurance programs for the population. ''Some programs are designed specifically to target inequalities between the rich and the poor, whereas others aim to cope with variations in income over the life cycle''.…”

Political Preferences and the Aging of Populations

“…Related models have been proposed, among others, by Casamatta et al (2000); Conde-Ruiz and Galasso (2005); Cremer et al (2007);Hassler et al (2007) and Bossi and Gumus (2012). The basic novelty in these models is that individuals do not only differ in terms of age (workers v.s pensioners) but also with respect to their income.…”

Public pensions and the intergenerational politics of aging societies

“…Soares (2011) compares voter choices within redistributive (Beveridgean) and earnings-based (Bismarckian) arrangements. With a similar restriction, Bossi and Gumus (2013) examine the choice between intra- and intergenerational transfers in light of inequality and mobility.…”