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The Electoral Effects of Income Redistribution

Open Panel

Abstract

Among the several political choices a democratic government has to make during its term, an important one is between redistributing income and keeping the status quo. If it chooses to redistribute income, there are many instruments available, the most important ones being tax reforms and expansion of welfare programs. Naturally, governments take the possible popular reaction into consideration when they make political decisions, because their heads (president or prime minister) want to remain in power. In this paper, I investigate how the population reacts to these three different political decisions: keeping the status quo, redistributing income via tax reforms, and redistributing income via expansion of welfare programs. I argue that the three alternatives are risky strategies that can lead to net electoral losses or gains for the incumbent, depending on country-specific characteristics, such as level of inequality, and on other (non-redistributive) policies implemented by the government. The paper is primarily theoretical, but I provide empirical evidence from selected Latin American and European countries to support my claims.