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.