Redistribution under general decision rules

Abstract

We study the political economy of redistribution over a broad class of decision rules. We suggest a simple and elegant procedure to select a robust equilibrium from the multiplicity in the core. Equilibrium policy depends on the full income profile, and, importantly, the preferences of two decisive voters. We show that the effect of increasing inequality depends on the decision rule and the shape of the income distribution; redistribution will increase if both decisive voters are "relatively poor," and decrease if at least one is sufficiently "rich." Additionally, redistribution decreases as the polity adopts increasingly stringent super-majority rules.

A general rank‐dependent approach for distributional comparisons

“…A notable application can be found in the equality of opportunity literature. In this specific branch of the economic literature, downside and upside inequality aversion can be usefully implemented to define the attitude of a social planner with respect to individual efforts when an opportunity equalizing policy needs to be implemented (see, among others, Brunori et al, 2014; Parameswaran & Rendleman, 2021). Alternative conceptions of inequality aversions are also present in the models developed along the rank‐dependent approach to compare distributions of individual income growth and intertemporal poverty (see Aaberge et al, 2019; Jenkins & Van Kerm, 2016; Lo Bue & Palmisano, 2020; Palmisano, 2018).…”

“…Thus, the normative criteria developed in this paper could in principle be implemented by statistical offices and government agencies, which are in charge of carrying out the key task of robustly comparing distribution functions of economic variables across countries, subgroups and time for descriptive analysis and policy evaluation. Similarly, this framework could be used to study the social welfare implications of the different redistribution schemes that are generated under a broad class of decision procedures, such as those related to the preferences of the median voter (see Parameswaran & Rendleman, 2021).…”