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Policy Uncertainty, Electoral Securities and Redistribution

Mattozzi, Andrea (2005) Policy Uncertainty, Electoral Securities and Redistribution. Social Science Working Paper, 1229. California Institute of Technology , Pasadena, CA. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20170808-150121475

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Abstract

This paper investigates how uncertainty about the adoption of a redistribution policy affects political support for redistribution when individuals can trade policy contingent securities in the stock market. We show that the demand for redistribution is always smaller than in the case where no “policy-insurance market” is available. Consistent with the empirical evidence, our analysis implies that in economies with well-developed financial markets the level of redistribution decreases with the level of participation in these markets and with income inequality. We show that the existence of a policy insurance market may increase future expected inequality even if a majority of individuals are redistributing resources through private transfers.


Item Type:Report or Paper (Working Paper)
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http://resolver.caltech.edu/CaltechAUTHORS:20171211-133711487Related ItemPublished Version
Additional Information:This paper is a chapter of my doctoral dissertation. I am grateful to Bob Inman, Andrew Postlewaite, Frank Schorfheide, and in particular to Antonio Merlo for their comments and encouragement. I also benefitted from discussions with Mike Alvarez, Marco Cozzi, Federico Echenique, Jan Eeckhout, Jacob Goeree, Daniela Iorio, Matt Jackson, Dirk Krueger, Elena Pastorino and Nicola Persico. All usual disclaimers apply.
Group:Social Science Working Papers
Subject Keywords:Policy Uncertainty, Financial Markets, Redistribution
Classification Code:JEL: D72, G10, D31
Record Number:CaltechAUTHORS:20170808-150121475
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20170808-150121475
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79962
Collection:CaltechAUTHORS
Deposited By: Hanna Storlie
Deposited On:09 Aug 2017 18:26
Last Modified:26 Apr 2019 21:06

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