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Political Economy of Redistribution in the United States in the Aftermath of World War II--Evidence and Theory

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  • Roel Beetsma
  • Alex Cukierman
  • Massimo Giuliodori

Abstract

We present legislative, historical and statistical evidence of a substantial upward ratchet in transfers and taxes in the US due to World War II. This finding is explained within a political-economy framework with defense spending responding to a war threat and a median voter in the population who interacts with a (richer) agenda setter in Congress in setting redistribution. While the setter managed to cap redistribution before the War, the War itself raised the status quo tax burden and improved tax collection technology, strengthening the bargaining power of the median voter as defense spending receded. This permanently raised the level of redistribution.

Suggested Citation

  • Roel Beetsma & Alex Cukierman & Massimo Giuliodori, 2016. "Political Economy of Redistribution in the United States in the Aftermath of World War II--Evidence and Theory," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 1-40, November.
    • Handle: RePEc:aea:aejpol:v:8:y:2016:i:4:p:1-40
    Note: DOI: 10.1257/pol.20140193
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    References listed on IDEAS

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    Cited by:

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    2. Islam, Md. Rabiul & Madsen, Jakob B. & Doucouliagos, Hristos, 2018. "Does inequality constrain the power to tax? Evidence from the OECD," European Journal of Political Economy, Elsevier, vol. 52(C), pages 1-17.
    3. Sara Torregrosa-Hetland & Oriol Sabaté, 2022. "Income tax progressivity and inflation during the world wars [War finance and inflation in Britain and Germany, 1914–1918]," European Review of Economic History, European Historical Economics Society, vol. 26(3), pages 311-339.

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
    • N42 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: 1913-

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