Interest-group politics under majority rule

Abstract

We develop a model of interest-group politics in which the groups and coalitions that arise, and the form of redistributive policies sought, are jointly determined. The model generates three key results. First, programs intended to reduce income inequality are more likely to involve direct payments than are programs that redistribute wealth across groups with similar incomes. Second, nonequalizing redistribution is unlikely unless the various participants in the political process face significantly different political and economic costs of obtaining transfers. Third, many policies that induce asymmetries among interest groups also impose significant deadweight costs. Stable nonequalizing redistribution will therefore tend to involve indirect and economically inefficient methods of transferring income.