 |
We study the effect of power sharing over income redistribution among different socio-economic groups in a model of redistributive politics with fairness concern. We prove that under fairly general conditions a unique pure-strategy equilibrium always exists. We also show in a tractable version of the model that equilibrium transfers are the sum of altruistic and tactical redistribution, where the first is given by the gap between the population and the group average pre-tax income; and the second is determined by the interplay of three main factors: (i) the relative ideological neutrality of the poor, (ii) parties' and voters' concern with income inequality, and (iii) the (dis)proportionality of the electoral rule. A number of comparative statics predictions emerge from our characterization. Among them, our analysis shows that the net transfers to the middle class and the rich (resp., the poor) increase (resp., decrease) with power sharing disproportionality. Further, we prove that the Gini coefficient associated with the distribution of disposable incomes also rises with the disproportionality of the power sharing rule. We confront these predictions to the data, using an unbalanced panel of developed and developing democracies. The empirical evidence strongly supports both, the existence of altruistic redistribution in the sample, as well as a positive and significant association between power sharing disproportionality and tactical redistribution (resp., income inequality).
- Other
