Inequality and Redistribution Flashcards
Meltzer & Richard 1981 model of redistribution
As income inequality rises, the median income drops in relation to the mean income (what we see in the UK example). And as that happens, the median voter is going to prefer greater redistribution. The median voter to the left of the mean they’re going to demand greater redistribution and vote accordingly. Their voting is going to influence tax and public goods policies and counter these excessive disparities so everything should balance out an equilibrium
Puzzle as in some nations this is not the case. Instead, public opposition to escalating economic inequality and support for redistribution are often surprisingly underwhelming.
What is redistribution?
Refers to the transfer of income/wealth from some to others, usually via some gov mechanism like taxation/social spending. Taking wealth/income from the rich & giving it to the less well-off in some form e.g. direct cash transfers, subsidising universal health care. Money in the UK that goes to the NHS/state schools. All are examples of redistribution.
Why don’t the poor soak the rich- Robin Hood paradox
Demand for redistribution will not always map onto actual redistributive policy
The Robin Hood hood paradox refers to why don’t the poor soak the rich (why don’t the poor vote in large numbers to tax the rich?
Ultimately, why don’t we see the predictions of the model come to fruition? Number of potential explanations and why there’s a lot of potential explanations for variation across countries in the level of redistribution and the tolerance for economic inequality.
Why don’t the poor soak the rich- explanations
1- Limits to political accountability- parties & politicians may not respond to voters to the median voters preferences for a variety of reasons e.g. it could be lobbying by business interests. So maybe politicians & parties don’t respond to the preferences of median voters because they’re pockets are stuffed with money by big business
2- Future expectation of earnings or mobility beliefs- voters who are relatively low income now but expect to be rich later like students. Have high prospects of upward mobility.
3- Inaccurate perceptions of economic inequality.
4- Unequal political participation- evidence that economic inequality can suppress political participation. If economic inequality/poverty is demobilising, we might see the median voter who actually votes is not representative of the median wealth/ income if we have some sort of systematic disengagement of people at the lower end of the income distribution.
5- Our beliefs about meritocracy & the “just world”- beliefs about deserving this, about the role of luck vs the role of effort in determining your financial success or failure. Just world beliefs refer to the belief that the world is inherently fair so people generally get what they deserve.
