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Eating the Rich vs. Feeding the Poor: Borrowing Constraints and the Reluctance to Redistribute

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  • Harms, Philipp
  • Zink, Stefan

Abstract

This paper offers an explanation why most democracies are characterized by moderate taxation of wealth although the wealth distribution is persistently skewed to the right. We model an economy in which agents have to acquire higher education to qualify for skilled work and in which capital market imperfections prevent poor individuals from making such a profitable human capital investment. If these borrowing constraints do not bind for members of the middle class, they may rationally reject redistribution although both the current and the future median of the wealth distribution are below the mean. Copyright 2003 by Kluwer Academic Publishers

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  • Harms, Philipp & Zink, Stefan, 2003. "Eating the Rich vs. Feeding the Poor: Borrowing Constraints and the Reluctance to Redistribute," Public Choice, Springer, vol. 116(3-4), pages 351-366, September.
    • Handle: RePEc:kap:pubcho:v:116:y:2003:i:3-4:p:351-66
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    References listed on IDEAS

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    1. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 447-487.
    2. Louis Putterman, 1997. "Why Have the Rabble not Redistributed the Wealth? On the Stability of Democracy and Unequal Property," International Economic Association Series, in: John E. Roemer (ed.), Property Relations, Incentives and Welfare, chapter 13, pages 359-393, Palgrave Macmillan.
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    6. Hindriks, Jean, 2001. "Is there a demand for income tax progressivity?," Economics Letters, Elsevier, vol. 73(1), pages 43-50, October.
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    8. Owen, Ann L. & Weil, David N., 1998. "Intergenerational earnings mobility, inequality and growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 71-104, February.
    9. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
    10. Breyer, Friedrich & Ursprung, Heinrich W, 1998. "Are the Rich Too Rich to be Expropriated?: Economic Power and the Feasibility of Constitutional Limits to Redistribution," Public Choice, Springer, vol. 94(1-2), pages 135-156, January.
    11. Piketty, Thomas, 2000. "Theories of persistent inequality and intergenerational mobility," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 8, pages 429-476, Elsevier.
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    Cited by:

    1. Sebastián Galiani, 2013. "Social Mobility: What is it and Why Does it Matter?," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 59, pages 167-229, January-D.
    2. Ushakov Denis & Natalia Bandurina & Sergey Shkodinsky, 2017. "Country s Welfare as an Efficiency Factor in Fiscal Policy Promoting Economig Growth," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 13(2), pages 121-127.
    3. Loukas Balafoutas, 2011. "How much income redistribution? An explanation based on vote-buying and corruption," Public Choice, Springer, vol. 146(1), pages 185-203, January.
    4. repec:mje:mjejnl:v:12:y:2017:i:2:p:121-127 is not listed on IDEAS
    5. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.

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