Political Economy of Redistribution

Abstract

It is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation. We use a model of multilateral bargaining to demonstrate that this intuition may be flawed. Increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property protection. One is formal constraints that allow individuals or groups to block any redistribution that is not in their favor. The other occurs in equilibrium where players without such powers protect each other from redistribution. Players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. In a stable allocation, the society exhibits a “class” structure with class members having equal wealth and strategically protecting each other from redistribution.

The Evolution of Collective Choice Under Majority Rule

“…The results of our evolutionary approach complement those in the recent literature on legislative bargaining with an endogenous status quo policy, as proposed by Baron (1996); see Kalandrakis (2004), Battaglini and Coate (2007), Penn (2009), Anesi (2010), Duggan and Kalandrakis (2012), Anesi and Seidmann (2015), and Diermeier et al (2017), among others. Most prior studies employ the rational choice paradigm, which assumes voters maximize their long-term utility, have perfect foresight, and have perfect knowledge of others' preferences.…”

“…They focus on a special class of no-delay stationary Markov perfect equilibria in which the first proposal is accepted and remains effective in all future rounds. In the case of a finite policy space, Anesi (2010) and Diermeier et al (2017) characterize a von-Neumann and Morgenstern stable set as the limit set of a stationary Markov perfect equilibrium. Battaglini and Coate (2007) examine the efficiency of legislative bargaining as it relates to public spending and taxation.…”

Bargaining over Taxes and Entitlements

“…In his environment, the focus is on private transfers, but there is no public good provision. Other papers that make contributions on legislative bargaining with unidimensional policies are Baron and Ferejohn (1989), Baron and Kalai (1993), Kalandrakis (2004), Battaglini et al (2012), Duggan and Kalandrakis (2012a), Dziuda and Loeper (2018), Dziuda and Loeper (2016), Anesi (2010), Anesi and Seidmann (2013), Anesi and Duggan (2018) Diermeier et al (2017), Richter (2014), Piguillem and Riboni (2011), Baron and Bowen (2015), Bowen et al (2017), Karakas (2017) and Grechyna (2017). Our main departure from these papers is that in our model government policies affect both, public and private goods.…”

Policy Experimentation, Redistribution and Voting Rules

“…Policy is assumed to continue unless changed by the committee, and, in this sense, exhibits an endogenous status quo feature. 1 More precisely, in each period, policy making is governed by the following protocol adapted from Diermeier et al (2017). Committee members have the opportunity to propose amendments to the ongoing status quo in random order, determined at the start of the period.…”