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Inequality, Redistribution, And Rent‐Seeking

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  • Francisco Rodríguez

Abstract

This paper presents a non‐median voter model of redistribution in which greater inequality leads to lower redistribution. Bargaining between interest groups and politicians over exemptions implies that individuals with sufficiently high income will not pay taxes in equilibrium. Therefore, voters will set tax rates low enough so as to control the incentives for rent‐seeking. An increase in inequality, by putting more income in the hands of individuals that can buy exemptions, will lead to lower equilibrium redistribution. The model can be used to account for a negative relationship between inequality and growth and provides a new explanation of why the poor do not expropriate the rich in democracies.

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  • Francisco Rodríguez, 2004. "Inequality, Redistribution, And Rent‐Seeking," Economics and Politics, Wiley Blackwell, vol. 16(3), pages 287-320, November.
    • Handle: RePEc:bla:ecopol:v:16:y:2004:i:3:p:287-320
    DOI: 10.1111/j.1468-0343.2004.00141.x
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    Cited by:

    1. Christophe Ehrhart, 2009. "The effects of inequality on growth: a survey of the theoretical and empirical literature," Working Papers 107, ECINEQ, Society for the Study of Economic Inequality.
    2. Alberto F. Alesina & Paola Giuliano, 2009. "Preferences for Redistribution," NBER Working Papers 14825, National Bureau of Economic Research, Inc.
    3. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    4. Gilles Le Garrec, 2011. "Redistribution and the cultural transmission of the taste for fairness," Documents de Travail de l'OFCE 2011-24, Observatoire Francais des Conjonctures Economiques (OFCE).
    5. Pi, Jiancai & Zhang, Pengqing, 2021. "Redistribution and wage inequality," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 510-523.
    6. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
    7. Ryo Arawatari & Tetsuo Ono, 2009. "The Political Economy of Social Security and Public Goods Provision in a Borrowing-constrained Economy," Discussion Papers in Economics and Business 09-38, Osaka University, Graduate School of Economics.
    8. Gilles Le Garrec, 2009. "Feeling guilty and redistributive politics," SciencePo Working papers Main hal-01066215, HAL.
    9. Gilles Le Garrec, 2009. "Feeling guilty and redistributive politics," Working Papers hal-01066215, HAL.
    10. Joan Esteban & Debraj Ray, 2006. "Inequality, Lobbying, and Resource Allocation," American Economic Review, American Economic Association, vol. 96(1), pages 257-279, March.
    11. Arawatari, Ryo & Ono, Tetsuo, 2009. "A second chance at success: A political economy perspective," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1249-1277, May.
    12. Campante, Filipe R. & Ferreira, Francisco H.G., 2007. "Inefficient lobbying, populism and oligarchy," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 993-1021, June.
    13. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," Working Papers hal-03429910, HAL.
    14. Gradstein, Mark, 2003. "The political economy of public spending on education, inequality, and growth," Policy Research Working Paper Series 3162, The World Bank.
    15. Campante, Filipe R., 2011. "Redistribution in a model of voting and campaign contributions," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 646-656, August.
    16. Matteo Cervellati & Joan Esteban & Laurence Kranich, 2010. "Work Values, Endogenous Sentiments and Redistribution," UFAE and IAE Working Papers 815.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    17. Alesina, Alberto & Baqir, Reza & Easterly, William, 2000. "Redistributive Public Employment," Journal of Urban Economics, Elsevier, vol. 48(2), pages 219-241, September.
    18. Muinelo-Gallo, Leonel, 2022. "Business cycles and redistribution: The role of government quality," Economic Systems, Elsevier, vol. 46(4).
    19. Gilles Le Garrec, 2014. "Fairness, socialization and the cultural deman for redistribution," SciencePo Working papers Main hal-03429910, HAL.
    20. Claudio Agostini & Phillip Brown, 2007. "Desigualdad geográfica en Chile," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 22(1), pages 3-33, June.
    21. Mayuri Chaturvedi, 2022. "A Model of Rent Seeking and Inequality," Working Papers 202215, University of Liverpool, Department of Economics.
    22. Gilles Le Garrec, 2011. "Redistribution and the cultural transmission of the taste for fairness," SciencePo Working papers Main hal-01069524, HAL.
    23. Alberto Melo, 2003. "Colombia: Los problemas de competitividad de un país en conflicto," Research Department Publications 1002, Inter-American Development Bank, Research Department.
    24. Daniel T. Haile, 2005. "Wealth Distribution, Lobbying and Economic Growth: Theory and Evidence," WIDER Working Paper Series RP2005-21, World Institute for Development Economic Research (UNU-WIDER).
    25. Joan Esteban & Debraj Ray, 2003. "Inequality and Public Resource Allocation," Working Papers 47, Barcelona School of Economics.

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