Balanced-budget redistribution as the outcome of political competition

Abstract

This paper models balanced-budget redistribution between socio-economic groups as the outcome of electoral competition between two political parties. Equilibrium is unique in the present model, and a sufficient condition for existence is given, requiring that there be enough 'stochastic heterogeneity' with respect to party preferences in the electorate. The validity of Hotelling's 'principle of minimum differentiation', and of 'Director's Law', are examined under alternative hypotheses concerning administrative costs of redistributions, and voter's possibilities both of abstaining from voting and of becoming campaign activists for one of the parties. The policy strategy of expected-plurality maximization is contrasted with the strategy of maximizing the probability of gaining a plurality. Incomes are fixed and known, so lumpsum taxation is feasible. However, constraints on tax/transfer differentiation between individuals are permitted in the analysis.

Caste, corruption and political competition in India

“…Relative to a world with no caste bias, corruption is higher for the party favored in the aggregate by caste bias, and lower for the other party. With probabilistic voting a la Lindbeck and Weibull (1987), caste-based preferences therefore have ambiguous effects on corruption.…”

The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain

“…Some of these hypotheses are derived from electoral competition models. For example, according to Lindbeck and Weibull (1987) and Dixit and Londregan (1998), upper-layer governments should allocate more grants to states with a high proportion of voters who are not specifically attached to any of the parties (the so-called 'swing voters'). The papers by Case (2001), Strömberg (2002), Johansson (2003) and Dahlberg and Johansson (2004) provide empirical evidence on the validity of this hypothesis.…”

Political Preferences and the Aging of Populations

“…Many have tried to incorporate the ideology of parties (e.g. Lindbeck and Weibull (1987); Dixit and Londregan (1998)) or to create complete models that trace political outcomes from the choice of citizens as candidates to final policies (e.g. Besley and Coate (1997);Osborne and Slivinski (1996)).…”

“…In probabilistic voting models (as opposed to deterministic models in the Downsian tradition) candidates/parties cannot predict with certainty how voters will respond to policy proposals or where exactly they are located in the policy space. For a seminal example see Lindbeck and Weibull (1987), for an overview and in depth elaboration see Coughlin (1992).…”

“…28 In what follows, however, I will abstract from many of these details because otherwise predictions about pension policy would be impossible to make. In fact, this section will draw on existing probabilistic voting models as developed and applied by, for instance, Lindbeck and Weibull (1987) and Tabellini (1999, 2000), to provide an analytical framework for thinking about pre-electoral dynamics and voting in a representative democracy. Note that a version of this approach has already been presented in chapter 3.2.3 in the context of the model by Profeta (2002b).…”