Premium
POLICY UNCERTAINTY, ELECTORAL SECURITIES, AND REDISTRIBUTION *
Author(s) -
Mattozzi Andrea
Publication year - 2010
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2009.00570.x
Subject(s) - redistribution (election) , economics , redistribution of income and wealth , financial market , inequality , monetary economics , stock market , labour economics , politics , finance , microeconomics , public good , mathematical analysis , paleontology , mathematics , horse , political science , law , biology
This article investigates how uncertainty about the adoption of a redistribution policy affects political support for redistribution when individuals can trade policy‐contingent securities in the stock market. In equilibrium the support for redistribution is smaller than where no “policy‐insurance market” is available. This implies that in economies with well‐developed financial markets redistribution decreases with the level of participation in these markets and with income inequality. Furthermore, the existence of a policy‐insurance market may lead to a less equal distribution of income than where no insurance is available even if a majority of individuals are redistributing resources through private transfers.