The Survival of the Welfare State
2002 (English)Report (Other academic)
This paper provides an analytical chracterization of Markov perfect equilibria in a politico-economic model with repeated voting, where agents vote over distortionary incom redistribution. The key feature of the theory is that the future constituency of redistributive policies depends positively on the current level of redistribution, since this affects both private investments and the future distribution of voters. Agents vote rationally and fully anticipate the effects of their political choice on both private incentives and future voting outcomes. The model features multiple equilibria. In "pro-welfare" equilibria, both welfare state policies and their effects on distribution persist forever. In "anti-welfare equilibria", eben a majority of beneficiaries of redistributive policies vote strategically so as to induce formation of a future majority that will vote for zero redistribution.
Place, publisher, year, edition, pages
Stockholm: IIES , 2002. , 49 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X
repeated voting, Markov equlibrium, multiple equilibria, welfare state, redistribution, political economy, policy persistence, wage inequality, education
IdentifiersURN: urn:nbn:se:su:diva-41189OAI: oai:DiVA.org:su-41189DiVA: diva2:328963