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The dynamics of government


Hassler, John; Krusell, Per; Storesletten, Kjetil; Zilibotti, Fabrizio (2005). The dynamics of government. Journal of Monetary Economics, 52(7):1331-1358.

Abstract

We model income redistribution with dynamic distortions as determined by rational voting without commitment among individuals of different types and income realizations. We find that redistribution is too persistent relative to that chosen by a planner with commitment. The difference is larger, the lower is the political influence of young agents, the lower is the altruistic concern for future generations, and the lower is risk-aversion. Furthermore, there tends to be too much redistribution in the political equilibrium. Finally, smooth preference aggregation, as under probabilistic voting, produces less persistence and does not admit multiple equilibria, which occur under majority-voting aggregation.

We model income redistribution with dynamic distortions as determined by rational voting without commitment among individuals of different types and income realizations. We find that redistribution is too persistent relative to that chosen by a planner with commitment. The difference is larger, the lower is the political influence of young agents, the lower is the altruistic concern for future generations, and the lower is risk-aversion. Furthermore, there tends to be too much redistribution in the political equilibrium. Finally, smooth preference aggregation, as under probabilistic voting, produces less persistence and does not admit multiple equilibria, which occur under majority-voting aggregation.

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31 citations in Web of Science®
31 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Welfare state dynamics, Markov equilibrium, Political economy, Redistribution, Repeated voting
Language:English
Date:October 2005
Deposited On:11 Feb 2008 12:29
Last Modified:05 Apr 2016 12:22
Publisher:Elsevier
ISSN:0304-3932
Publisher DOI:10.1016/j.jmoneco.2005.08.012
Permanent URL: http://doi.org/10.5167/uzh-2229

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