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Income Distribution, Borrowing Constraints and Redistributive Policies

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  • G. BellettiniC Berti Ceroni

Abstract

This paper proposes an explanation for why universal suffrage has not implied larger rich-to-poor transfers of wealth. The main argument is that, in the presence of borrowing constraints, if current taxation finances (at least partially) policies that redistribute future income, the poor, who are more likely to be liquidity constrained, may form a coalition with the rich and vote for low redistribution. In this context, the effects of an increase in income inequality is concentrated among the poor or the middle class. In the former case, an increase in inequality tends to decrease redistribution, whereas, in the latter case, it tends to increase redistribution.

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  • G. BellettiniC Berti Ceroni, 1999. "Income Distribution, Borrowing Constraints and Redistributive Policies," Working Papers 359, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:359
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    Cited by:

    1. Tetsuo Ono, 2016. "Marital Status and Derived Pension Rights: A Political Economy Model of Public Pensions with Borrowing Constraints," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(1), pages 99-124, February.
    2. Loukas Karabarbounis, 2011. "One Dollar, One Vote," Economic Journal, Royal Economic Society, vol. 121(553), pages 621-651, June.
    3. Matsuoka, Tarishi & Naito, Katsuyuki & Nishida, Keigo, 2019. "The Politics Of Financial Development And Capital Accumulation," Macroeconomic Dynamics, Cambridge University Press, vol. 23(1), pages 358-383, January.
    4. Ryo Arawatari & Tetsuo Ono, 2015. "Redistributive Politics And Government Debt In A Borrowing-Constrained Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 83-103, January.
    5. Ryo Arawatari & Tetsuo Ono, 2014. "Old-age Social Security versus Forward Intergenerational Public Goods Provision," The Japanese Economic Review, Japanese Economic Association, vol. 65(3), pages 282-315, September.
    6. Vasiliy A. Anikin & Yulia P. Lezhnina & Svetlana V. Mareeva & Ekaterina D. Slobodenyuk & Nataliya N. Tikhonovà, 2016. "Income Stratification: Key Approaches and Their Application to Russia," HSE Working papers WP BRP 02/PSP/2016, National Research University Higher School of Economics.
    7. Francesca Mariani & Mariateresa Ciommi & Francesco M. Chelli & Maria Cristina Recchioni, 2022. "An Iterative Approach to Stratification: Poverty at Regional Level in Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(2), pages 873-903, June.
    8. 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.
    9. Eisenhauer, Joseph G., 2011. "The rich, the poor, and the middle class: Thresholds and intensity indices," Research in Economics, Elsevier, vol. 65(4), pages 294-304, December.
    10. Ryo Arawatari & Tetsuo Ono, 2011. "Old-age Social Security vs. Forward Intergenerational Public Goods Provision," Discussion Papers in Economics and Business 11-26, Osaka University, Graduate School of Economics.
    11. Kosec, Katrina, 2014. "Relying on the private sector: The income distribution and public investments in the poor," Journal of Development Economics, Elsevier, vol. 107(C), pages 320-342.
    12. Ryo Arawatari & Tetsuo Ono, 2008. "Aging, Inequality and Social Security," Discussion Papers in Economics and Business 08-19, Osaka University, Graduate School of Economics.
    13. Christophe Hachon, 2009. "A Dynamic Explanation of the Crisis of the Welfare State," Working Papers halshs-00371205, HAL.
    14. Li Sheng & Zhaoyong Zhang, 2022. "Revisiting global imbalances: A comparative analysis of income and consumption inequality," Economics and Politics, Wiley Blackwell, vol. 34(2), pages 382-390, July.

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