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INCOME INEQUALITY, MOBILITY, AND THE WELFARE STATE: A POLITICAL ECONOMY MODEL
Published online by Cambridge University Press: 04 April 2012
Abstract
In this paper, we set up a three-period stochastic overlapping-generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.
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- Macroeconomic Dynamics , Volume 17 , Special Issue 6: Equality, Public Insurance, and Monetary Policy , September 2013 , pp. 1198 - 1226
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- Copyright © Cambridge University Press 2012
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