TY - JOUR
T1 - The survival of the welfare state
AU - Hassler, John
AU - Mora, José V.Rodríguez
AU - Storesletten, Kjetil
AU - Zilibotti, Fabrizio
PY - 2003/3
Y1 - 2003/3
N2 - This paper provides an analytical characterization of Markov perfect equilibria in a model with repeated voting, where agents vote over distortionary income redistribution. A key result is that the future constituency for redistributive policies depends positively on current redistribution, since this affects both private investments and the future distribution of voters. The model features multiple equilibria. In some equilibria, positive redistribution persists forever. In other equilibria, even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period. Skill-biased technical change makes the survival of the welfare state less likely.
AB - This paper provides an analytical characterization of Markov perfect equilibria in a model with repeated voting, where agents vote over distortionary income redistribution. A key result is that the future constituency for redistributive policies depends positively on current redistribution, since this affects both private investments and the future distribution of voters. The model features multiple equilibria. In some equilibria, positive redistribution persists forever. In other equilibria, even a majority of beneficiaries of redistribution vote strategically so as to induce the end of the welfare state next period. Skill-biased technical change makes the survival of the welfare state less likely.
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U2 - 10.1257/000282803321455179
DO - 10.1257/000282803321455179
M3 - Review article
AN - SCOPUS:2942718957
SN - 0002-8282
VL - 93
SP - 87
EP - 112
JO - American Economic Review
JF - American Economic Review
IS - 1
ER -
