Rich Voters Research Articles

Class Altruism and Redistribution

AbstractWhy do tax rates vary so much across countries? We study the role of other-regarding preferences and ethnic fragmentation in redistribution. A government is elected by altruistic voters and chooses a redistributive income tax. Altruism is directed towards social identity groups. Three main factors yield low levels of redistribution: (i) strong in-group altruism among rich voters—referred to as class altruism; (ii) weak universal altruism—in particular among the rich; and (iii) ethnic fragmentation among poor voters. We document survey evidence that the pattern of altruism in the United States and the European Union is consistent with the observed differences in taxes.

Political dynamics, public goods and private spillovers

Positive and negative spillovers from private activities onto aggregate economic outcomes are empirically significant. How might politics interact with private investment incentives and their externalities? Our theory connects politics to policies which distort private spillovers. This has implications for empirical identification. In our model, for large negative externality there is a unique equilibrium with perpetually high tax rates and majority poor voters. This is a consequence of political manipulation that anticipates private spillovers on forward-looking investment decisions. When positive spillovers are sufficiently large, individuals can coordinate on policies that encourage private investment. This sustains an equilibrium with perpetually low tax rates and majority rich voters. The resulting multiple equilibria can be used to interpret existing conundrums in empirical findings. We can also rationalize an observed cross-country empirical regularity in terms of public funding for knowledge goods and income inequality.

Class Altruism and Redistribution

Why do tax rates vary so much across countries? We study the role of other-regarding preferences and ethnic fragmentation in redistribution. The government of a two-party democracy is elected by altruistic voters and decides on a redistributive income tax. Social identification directs voters' altruism toward specific social groups. We identify three main factors that lead to low levels of redistribution in the political equilibrium: (i) strong in-group altruism of the rich voters---which we refer to as class altruism; (ii) weak universal altruism among all voters---in particular the rich; and (iii) ethnic fragmentation among poor voters. Using survey data, we document evidence on the pattern of altruism in the United States and the European Union and find that our model predictions are consistent with the observed differences in tax rates.

The right type of legislator: A theory of taxation and representation

We develop a theory of taxation and the distribution of government spending in a citizen-candidate model of legislatures. Individuals are heterogeneous in two dimensions: productive ability in the private sector and negotiating ability in politics. When these are positively correlated, rich voters always prefer a rich legislator, but poor voters face a trade-off. A rich legislator will secure more pork for the district, but will also prefer lower taxation than the poor voter. Our theory organizes a number of stylized facts across countries about taxation and redistribution, parties, and class representation in legislatures. We demonstrate that spending does not necessarily increase when the number of legislators increases, as the standard common-pool intuition suggests, and that many policies aimed at increasing descriptive representation may have the opposite effect.

Knowledge is Power: A Theory of Information, Income and Welfare Spending

No voters cast their votes based on perfect information, but richer voters are on average best informed. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, income is more important in affecting voting behaviour for more informed voters than for less informed voters. Further, when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory.

One Vote or Many Mexicos? Income, Heterogeneity, and the 2006–2012 Presidential Elections*

ObjectiveThis article investigates the role of income and income heterogeneity on voters’ preferences for the conservative party.MethodsFitting a series of logistic regressions on exit poll data from the 2006 and 2012 Mexican presidential elections.ResultsWe find that heterogeneity mediates the effect of income on the probability of voting for the conservative candidate.ConclusionIn more heterogeneous places, rich voters are more likely to support the candidate on the right than their counterparts in more homogeneous places, while poorer voters are more likely to vote for Partido Accion Nacional in less heterogeneous places. In more heterogeneous states, voters are more likely to encounter members of other socioeconomic groups who prompt them to vote for the party that better represents their group's interests.

Income and policy choices: Evidence from parliamentary decisions and referenda

We analyze political representation of low, middle, and high-income voters by matching their referendum choices with parliamentary decisions of legislators on the identical policy proposals. Legislators more closely represent preferences of rich voters than preferences of middle-income and poor voters.

Preferences over Equality in the Presence of Costly Income Sorting

We analyze preferences over redistribution in societies with costly (positive) sorting according to income. We identify a new motivation for redistribution, where individuals support taxation in order to reduce the incentives to sort. We characterize a simple condition over income distributions which implies that even relatively rich voters—with income above the mean—will prefer full equality (and thus no sorting) to societies with costly sorting. We show that the condition is satisfied for relatively equal income distributions. We also relate the condition to several statistical properties which are satisfied by a large family of distribution functions. (JEL D31, D63, H23)

The Rich are Different: The Effect of Wealth on Partisanship

Rich voters tend to be Republicans and poor voters tend to be Democrats. Yet, in most settings it is difficult to distinguish the effects of affluence on partisanship from those of closely related variables such as education. To address these concerns I use state lottery and administrative records to examine the effect of changing economic circumstances on the partisanship of over 1,900 registered voters. Winning larger amounts in the lottery produces a small increase in the probability an individual is later a registered Republican, an effect that is larger for those who registered to vote after winning. This suggests that wealth does affect partisanship, particularly for those without preexisting attachments to a political party. Comparing estimates from the lottery to cross-sectional data suggests the latter exaggerates the relationship between wealth and partisanship, although controlling for additional variables produces largely similar estimates.

REDISTRIBUTION, PORK, AND ELECTIONS

Why might citizens vote against redistributive policies from which they would seem to benefit? Many scholars focus on ‘wedge’ issues such as religion or race, but another explanation might be geographically-based patronage—or pork. We examine the tension between redistribution and patronage with a model that combines partisan elections across multiple districts with legislation in spatial and divide-the-dollar environments. The model yields a unique equilibrium that describes the circumstances under which poor voters support right-wing parties that favor low taxes and redistribution, and under which rich voters support left-wing parties that favor high taxes and redistribution. The model suggests that one reason standard tax and transfer models of redistribution often do not capture empirical reality is that redistributive transfers are a less efficient tool for attracting votes than are more targeted policy programs. The model also underlines the central importance of party discipline during legislative bargaining in shaping the importance of redistribution in voter behavior, and it describes why right-wing parties should have an advantage over left-wing ones in majoritarian systems.

Knowledge is Power - A Theory of Information, Income, and Welfare Spending

No voters cast their votes based on perfect information, but better educated and richer voters are on average better informed than others. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, we find that income is more important in affecting voting behavior for more informed voters than for less informed voters, as predicted by the model. Further, in a panel of US states we find that when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory.

Knowledge is Power: A Theory of Information, Income, and Welfare Spending

No voters cast their votes based on perfect information, but better educated and richer voters are on average better informed than others. We develop a model where the voting mistakes resulting from low political knowledge reduce the weight of poor voters, and cause parties to choose political platforms that are better aligned with the preferences of rich voters. In US election survey data, we find that income is more important in affecting voting behavior for more informed voters than for less informed voters, as predicted by the model. Further, in a panel of US states we find that when there is a strong correlation between income and political information, Congress representatives vote more conservatively, which is also in line with our theory.

How much income redistribution? An explanation based on vote-buying and corruption

This paper studies how income tax rates are determined and how they are related to government corruption in the form of fund capture. A model is presented where rich voters can block redistribution by buying the votes of some poor voters. In equilibrium there is only limited redistribution and income tax rates are a negative function of government corruption. When rich voters can bribe the government, an additional equilibrium with zero taxation is possible. The link between corruption and tax rates is tested using cross country data; the empirical evidence is fully consistent with the predictions of the model.

Redistribution, Pork and Elections

Why might citizens vote against redistributive policies from which they would seem to benefit? Many scholars focus on wedge issues such as religion or race, but another explanation might be geographically-based patronage or pork. We examine the tension between redistribution and patronage with a model that combines partisan elections across multiple districts with legislation in spatial and divide-the-dollar environments. The model yields a unique equilibrium that describes the circumstances under which poor voters support right-wing parties that favor low taxes and redistribution, and under which rich voters support left-wing parties that favor high taxes and redistribution. The model suggests that one reason standard tax and transfer models of redistribution often do not capture empirical reality is that redistributive transfers are a less efficient tool for attracting votes than are more targeted policy programs. The model also underlines the central importance of party discipline during legislative bargaining in shaping the importance of redistribution in voter behavior, and it describes why right-wing parties should have an advantage over left-wing ones in majoritarian systems.

The Social Sources of Late Eighteenth-Century English Radicalism: Bristol in the 1770s and 1780s

The case that religion alone can account for radicalism in the later eighteenth century has been persuasively argued and has received some empirical support. We test it using data from Bristol during the American crisis. Literature from the 1774 election shows that contemporaries assumed commonality of interest of poor voters with other poor voters and with the anti-establishment/radical candidates, and commonality of interest of richer voters with other rich voters and with the establishment candidates. To a lesser extent voters were encouraged to vote as loyal Anglicans or religious Dissenters. To see how this rhetoric translated into action, a poll book (1774), a city directory (1775), and rate and tax returns (1773–7) were combined by nominal record linkage. Using the linked data we found that poorer Bristolians voted preferentially for anti-ministerial candidates and particularly for the radical candidate, while richer Bristolians tended to support the ministerial candidates. The divisions were clear when voting was compared with wealth (using fiscal data), and when compared with occupation provided an appropriate classification was used. To see if radical action was sustained in Bristol, loyal addresses and petitions for conciliation of the Americans were examined. The rhetoric surrounding petitioning/addressing again assumed commonality of interest based on socio-economic circumstance. This carried over into action: petitioners for conciliation tended to be poorer people, whilst addressers, who favoured coercion, tended to be richer. The study refutes the thesis that religion alone accounts for radical behaviour, and suggests the need to examine the totality of people's experience before their political behaviour can be fully understood.

Recent Books in the Field of Public Opinion Research

Andrew Gelman describes and explains in this book the “red–blue paradox”. Looking at the 2000 and 2004 elections, this paradox becomes apparent in the voting patterns of states and individual voters. Rich states have become more strongly Democratic over time, while poor states are likely to vote republican. However, rich voters have remained consistently more Republican than voters with less income. The discrepancy in voting patterns for states and individual voters is the essence of the “red–blue paradox”. The book starts out with the basic facts on income and voting, and Gelman explores the ways in which race and religion play a role in the explanation of national voting patterns. With election results and survey data, the author debunks several myths about the relationships...

Why Rich States Aren't Republican

Red State, Blue State, Rich State, Poor State . Why Americans Vote the Way They Do. By Andrew Gelman, David Park, Boris Shor, Joseph Bafumi, and Jeronimo Cortina . Princeton University Press, Princeton, NJ, 2008. 247 pp. $27.95, £16.95. ISBN 9780691139272. Beginning with the paradox that while rich states have tilted toward the Democratic Party, rich voters still tend to favor the Republicans, the authors explore voting patterns in recent U.S. elections and their implications for American politics.

Uncertainty and the size of government

Voters decide on a proportional income tax. Uncertainty about government revenue can lead to a larger or smaller tax rate depending on the voters' degree of prudence. It is possible for rich voters to be better off under uncertainty.

Why the poor do not expropriate the rich: an old argument in new garb

We consider a political economy with two partisan parties; each party represents a given constituency of voters. If one party (Labour) represents poor voters and the other (Christian Democrats) rich voters, if a redistributive tax policy is the only issue, and if there are no incentive considerations, then in equilibrium the party representing the poor will propose a tax rate of unity. If, however, there are two issues – tax policy and religion, for instance – then this is not generally the case. The analysis shows that, if a simple condition on the distribution of voter preferences holds, then, as the salience of the non-economic issue increases, the tax rate proposed by Labour in equilibrium will fall – possibly even to zero – even though a majority of the population may have an ideal tax rate of unity.