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Title: Inequality and size of the government when voters have other regarding preferences
Authors: Dhami, Sanjit
al-Nowaihi, Ali
First Published: Jul-2008
Publisher: Dept. of Economics, University of Leicester
Abstract: The celebrated relation between inequality and redistribution is based on selfish voters who care solely about own-payouts. A growing empirical literature highlights the importance of other regarding preferences (ORP) in voting over redistribution. We reexamine the relation between inequality and redistribution, within a simple general equilibrium model, when voters have ORP. Our contribution is five-fold. First, we demonstrate the existence of a Condorcet winner. Second, poverty can lead to increased redistribution (which implies a countercyclical social spending to GDP ratio). Third, we show that disposable income 'strongly median-dominates' factor income. Fourth, we show that fair voters respond to an increase in 'strong median-dominance' by engaging in greater redistribution. Fifth, an illustrative em- pirical exercise using OECD data points to the importance of fairness in explaining redistribution.
Series/Report no.: Papers in Economics
Type: Report
Appears in Collections:Reports, Dept. of Economics

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