TY  - JOUR
AU  - Fernández,Raquel
AU  - Levy,Gilat
TI  - Diversity and Redistribution
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11570
PY  - 2005
Y2  - August 2005
UR  - http://www.nber.org/papers/w11570
L1  - http://www.nber.org/papers/w11570.pdf
N1  - Author contact info:
Raquel Fernández
Department of Economics
New York University
19 West 4th Street, 6th Floor
New York, NY  10012
Tel: 212/998-8908
Fax: 212/995-4186
E-Mail: raquel.fernandez@nyu.edu

Gilat Levy
M2  - featured in NBER digest on 2005-08-22
AB  - This paper examines how preference heterogeneity affects the ability of the poor to extract resources from the rich. We study the equilibrium of a game in which coalitions of individuals form parties, parties propose platforms, and all individuals vote, with the winning policy chosen by plurality. Political parties are restricted to offering platforms that are credible (in that they belong to the Pareto set of their members). The platforms specify the values of two policy tools: a general redistributive tax which is lumpsum rebated and a series of taxes whose revenue is used to fund specific (targeted) goods. We show that taste conflict first dilutes but later reinforces class interests. When the degree of taste diversity is low, the equilibrium policy is characterized by some amount of general income redistribution and some targeted transfers. As taste diversity increases in society, the set of equilibrium policies becomes more and more tilted towards special interest groups and against general redistribution. As diversity increases further, however, only general redistribution survives.
ER  -