Political Economy of Redistribution

Daniel Diermeier, Georgy Egorov, Konstantin Sonin

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

It is often argued that additional constraints on redistribution such as granting veto power to more players in society better protects property from expropriation. We use a model of multilateral bargaining to demonstrate that this intuition may be flawed. Increasing the number of veto players or raising the supermajority requirement for redistribution may reduce protection on the equilibrium path. The reason is the existence of two distinct mechanisms of property protection. One is formal constraints that allow individuals or groups to block any redistribution that is not in their favor. The other occurs in equilibrium where players without such powers protect each other from redistribution. Players without formal veto power anticipate that the expropriation of other similar players will ultimately hurt them and thus combine their influence to prevent redistributions. In a stable allocation, the society exhibits a “class” structure with class members having equal wealth and strategically protecting each other from redistribution.

Original languageEnglish (US)
Pages (from-to)851-870
Number of pages20
JournalEconometrica
Volume85
Issue number3
DOIs
StatePublished - May 2017

Keywords

  • Political economy
  • institutions
  • legislative bargaining
  • property rights

ASJC Scopus subject areas

  • Economics and Econometrics

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