Positional concern and low demand for redistribution of the poor

The two observations that (1) some low-income citizens demand low redistribution and (2) as income inequality becomes more severe a larger proportion of citizens make less demand for redistribution (Kelly and Enns (2010)) are counter-intuitive because people oppose redistribution that could be beneficial to them. Understanding the main driving factor that leads to the economic conservatism of the poor is crucial: it guides how policymakers should design redistribution. I show that positional concern can be one of these main factors. When citizens care about their relative position on consumption and their labor productivity is slightly perturbed when a new tax policy is implemented, only middle-income citizens may vote for redistribution. Compared with the prospect of upward mobility hypothesis, I provide a testable prediction for the relationship between economic inequality and the economic conservatism of the poor. If positional concern is the main driving factor, policymakers should focus on increasing the low-income citizens’ standard of living to the middle class; and if the prospect of upward mobility is the main factor then they should focus on minimizing income gaps.