Abstract
We study how political competition over redistribution determines income inequality under one macrofounded premise: the income distribution is approximately log-normal before and after any policy intervention. The unique equilibrium features substantial income inequality and less than maximal redistribution, even if the voters’ median income is very low. Fitting our model to the US economy, we argue that either the efficiency cost of redistribution is higher than estimates in the literature, or else US’s redistributive policies are optimal for an agent richer than the median voter.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
