Inequality, Redistribution, and Rent‐seeking

Rodríguez, Francisco

doi:10.1111/j.1468-0343.2004.00141.x

Cited by 77 publications

(49 citation statements)

References 44 publications

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“…As in Bénabou (2000) and Rodriguez (2004), this is a consequence of a higher level of participation by the rich in the political process.…”

Section: Inequality and Taxationmentioning

confidence: 99%

“…However, in this paper, the influence of the rich is unaffected by the (in)efficiency of taxation as in Bénabou (2000) or the availability of quid pro quo contributions or bribes as in Rodriguez (2004).…”

mentioning

confidence: 99%

“…In unconsolidated democracies, the rich might exert undue influence by threatening coups or unrest (Ellman and Wantchekon, 2000;Dal Bó and di Tella, 2003). In consolidated democracies, the rich can use contributions (e.g., Rodriguez, 2004) or independent expenditures (as the Koch brothers' support for Governor Walker illustrates). As the example of the Cartel illustrates, the rich also have the capacity to constrain the fiscal policy of a government opposed to their interests by taking actions that hurt the party or coalition of parties in power.…”

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confidence: 99%

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Political conflicts, the role of opposition parties, and the limits on taxation

Wolton

2014

Journal of Theoretical Politics

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In democratic systems, the rich have diverse channels through which they can influence policies. In a model of taxation, I study the capacity of the rich to constrain the fiscal choice of a government by starting a costly political conflict (for example, a press campaign), which imposes a cost on the government and influences the fate of the government's fiscal plan.I show that the government's tax proposal depends critically on the marginal disutility of taxation for the rich. This approach provides a new rationale for the empirically documented U-shaped relationship between inequality and taxation. It also highlights a new role for opposition parties. By agreeing to bear part of the cost of a political conflict in exchange for compromise, the opposition makes Pareto-improving arrangements possible. KeywordsPolitical conflict; opposition party; coalition; taxation 1 In May 1924 in France, a coalition of left-wing parties the Cartel des Gauches won the general election with a promise to tackle a mounting public debt problem through capital taxation. In July 1926, as demonstrations were staged in front of the French Parliament and monetary panic spread, the Cartel was replaced by a center-right coalition. During the Cartel's tenure, the rich and the business community strongly opposed any attempt by the government to impose a capital levy.This opposition took the form of capital evasion and a massive press campaign against a capital tax, eventually swaying public opinion against the governing coalition. 1It is well understood that the poor have the capacity to constrain the rich in autocracies (Acemoglu and Robinson, 2005). In unconsolidated democracies, the rich might exert undue influence by threatening coups or unrest (Ellman and Wantchekon, 2000;Dal Bó and di Tella, 2003). In consolidated democracies, the rich can use contributions (e.g., Rodriguez, 2004) or independent expenditures (as the Koch brothers' support for Governor Walker illustrates). As the example of the Cartel illustrates, the rich also have the capacity to constrain the fiscal policy of a government opposed to their interests by taking actions that hurt the party or coalition of parties in power.In this paper, I study this last channel of influence in a stylized model of taxation. A government (referred to by the pronoun "he" throughout) chooses a tax level under the threat of political conflict by the rich who dislike redistribution. A political conflict is costly to organize for the rich, and this cost is their private information (for example, it can depend on their ability to coordinate their actions). It has two effects on the government. First, it imposes a direct utility loss (for example, due to the cost of mounting a public relation campaign to defend the government's plan or the increased risk of losing the next election). Second, with some probability, a political conflict forces the government to abandon his fiscal project (for example, it might sway public opinion against the government's tax proposal as in the case of the...

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“…As in Bénabou (2000) and Rodriguez (2004), this is a consequence of a higher level of participation by the rich in the political process.…”

Section: Inequality and Taxationmentioning

confidence: 99%

mentioning

confidence: 99%

mentioning

confidence: 99%

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Political conflicts, the role of opposition parties, and the limits on taxation

Wolton

2014

Journal of Theoretical Politics

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“…The majority of these works claim that democracies tend to redistribute more towards the poor, consistent with the median voter model by Meltzer and Richard (1981), with decreasing inequality as a final result. As a counterbalance to this, there has been a strand of literature which has claimed that redistribution in different types of political regimes is primarily influenced by decisions of efficiency rather than politics (Sala-i-Martin, 1996;Benabou, 1996;Rodriguez, 2004). This group of authors tend to conclude that regime type cannot be considered as one of the main determinants of inequality.…”

Section: Introductionmentioning

confidence: 99%

Democracy and income inequality: revisiting the long- and short-term relationship

Nikoloski¹

2015

Review of Economics and Institutions

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This paper studies the relationship between democracy and income inequality in long--and short/medium--run. Using appropriate econometric techniques on both, averaged and panel data for the period 1962--2006, we find no evidence that democracy is associated with tighter income distribution. Our results are robust to different specification techniques, to exclusion of developed as well as the transition countries. We speculate that different (and opposing) transmission mechanisms, as well as the nature and the definition of the democracy variable (both Polity IV and Freedom House) influence our results. Improvement of conceptualization and measurement of democracy could shed further light onto the democracy--inequality nexus.

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“…In cross-country studies, Mueller and Murrell (1986) find some weak support, but Kristov, Lindert and McClelland (1992) even find that a lower median to mean income ratio decreases redistribution. According to Rodriguez (1998), not a single redistribution measure is positively affected by inequality of gross income. Also Perotti (1996) does not find any link between inequality and tax rates or transfers, respectively.…”

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confidence: 99%

Income inequality, voting over the size of public consumption, and growth

Grossmann

2003

European Journal of Political Economy

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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. Terms of use: Documents in AbstractAccording to a standard argument, higher income inequality fosters redistributive activities of the government in favor of the median income earner. This paper shows that if redistribution is achieved by a public provision of goods and services rather than by transfers, higher income inequality may imply a smaller size of the government in majority voting equilibrium. In addition to a static voting model, an endogenous growth model is analyzed to examine the role of saving decisions of heterogeneous individuals for both the distributional incidence of proportional factor income taxes and the voting outcome.JEL Classification: D33, H40, O41.

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Inequality, Redistribution, and Rent‐seeking

Cited by 77 publications

References 44 publications

Political conflicts, the role of opposition parties, and the limits on taxation

Political conflicts, the role of opposition parties, and the limits on taxation

Democracy and income inequality: revisiting the long- and short-term relationship

Income inequality, voting over the size of public consumption, and growth

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