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Invest, expropriate, or wait? Expected income and the demand for redistribution

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  • Harms, Philipp
  • Zink, Stefan

Abstract

In this paper we offer an explanation why a poor majority does not necessarily expropriate a rich minority. We present a dynamic model in which individuals are willing to accept an unequal distribution of income in the current period if they are sufficiently optimistic about their future economic prospects. In this case, the fact that a policy of radical redistribution inflicts a persistent damage on the economy and thus reduces agents' future earning possibilities prevents the poor from expropriating the rich. Unlike previous contributions, we do not assume exogenous changes of the income distribution, but relate such changes to agents' rational investment decisions.

Suggested Citation

  • Harms, Philipp & Zink, Stefan, 2000. "Invest, expropriate, or wait? Expected income and the demand for redistribution," Discussion Papers, Series I 305, University of Konstanz, Department of Economics.
    • Handle: RePEc:zbw:kondp1:305
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    References listed on IDEAS

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    7. Hans Peter Gruner & Giacomo Corneo, 2000. "Social Limits to Redistribution," American Economic Review, American Economic Association, vol. 90(5), pages 1491-1507, December.
    8. Friedrich Breyer & Heinrich Ursprung, 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), pages 135-156, January.
    9. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
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    Cited by:

    1. Leif Danziger & Heinrich Ursprung, 2000. "Risk-Aversion and Social Mobility: The Impossibility of Order-Preserving Income Redistributions," CESifo Working Paper Series 321, CESifo.
    2. 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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    More about this item

    Keywords

    political economy; inequality; redistribution of income;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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