SFB 303 Discussion Paper No. A - 520

Author: Corneo, Giacomo, and Hans Peter Grüner
Title: Social Limits to Redistribution
Abstract: We argue that the desire of the median voter to maintain his social position may be the crucial factor limiting the extent of redistribution in democracies. Social limits to redistribution arise when economic inequality has an informational value for social decisions, and therefore redistribution affects how well individuals fare in social interactions. In some identifiable circumstances, middle-class voters will be willing to provide political support to conservative taxation programs just in order to minimize the scope of competition with the poor in the social sector. Different amounts of redistribution can thus be explained by different organizations of social competition. Redistributive taxation is shown to respond in an unconventional manner to changes in pre-tax inequality.
Keywords: Redistributive politics, social status
JEL-Classification-Number: D31, D72, H23
Creation-Date: April 1996
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