Diversity and redistribution
By: Raquel Fernǹdez, Gilat Levy.
Contributors: Levy, Gilat, 1970-; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11570; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11570.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Income distribution -- Mathematical models; Income tax -- Mathematical models; Wealth -- Mathematical models; Social classes -- Economic aspects -- Mathematical models; Equality -- Mathematical models
Description: "This paper examines how preference heterogeneity affects the ability of the poor to extract resources from the rich.  We study the equilibrium of a game in which coalitions of individuals form parties, parties propose platforms, and all individuals vote, with the winning policy chosen by plurality.  Political parties are restricted to offering platforms that are credible (in that they belong to the Pareto set of their members).  The platforms specify the values of two policy tools: a general redistributive tax which is lumpsum rebated and a series of taxes whose revenue is used to fund specific (targeted) goods.  We show that taste conflict first dilutes but later reinforces class interests.  When the degree of taste diversity is low, the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers.  As taste diversity increases in society, the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution.  As diversity increases further, however, only general redistribution survives"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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