Case Study:

Voting, inequality, and redistribution

Inequality of income and wealth has been steadily increasing in most rich countries since the

1980s. By the median voter theorem, we would then expect an increase in taxation and

redistribution as a policy outcome of democratic deliberation.

This should follow if the preferred tax rate of an individual is a decreasing function of her

endowment, that is, poor people want more redistribution than rich people. Note that the

median endowment is systematically below the average endowment (as the resource

distribution is very skewed, presenting a long tail to the right), and the gap between the median

and the average increases with inequality.

However, this is not what we have seen happening since the 1980s. Roughly speaking, the

progressivity of the tax system has been progressively eroded (effectively, the very rich are

now taxed at about the same rate as the middle class, while top incomes were taxed at much

higher rates before the 1980s – just look at the debate around Saez & Zucman’s recent book,

The Triumph of Injustice) and strongly redistributive policies haven’t appeared much in the

political agendas of left-wing parties.

How would you explain the simultaneous increase in inequality and decrease in redistributive

policies? Why does the median voter theorem prediction fail? Do you think the situation may

change any soon?

A country or several countries need to be picked adequately to the Case Study.