The dynamics of government

John Hassler, Per Krusell, Kjetil Storesletten, Fabrizio Zilibotti

Research output: Contribution to journalArticlepeer-review

40 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)1331-1358
Number of pages28
JournalJournal of Monetary Economics
Volume52
Issue number7
DOIs
StatePublished - Oct 2005
Externally publishedYes

Keywords

  • Markov equilibrium
  • Political economy
  • Redistribution
  • Repeated voting
  • Welfare state dynamics

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