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Policy uncertainty, electoral securities and redistribution

Mattozzi, Andrea (2010) Policy uncertainty, electoral securities and redistribution. International Economic Review, 51 (1). pp. 45-71. ISSN 0020-6598.

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This article 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. In equilibrium the support for redistribution is smaller than where no “policy-insurance market” is available. This implies that in economies with well-developed financial markets redistribution decreases with the level of participation in these markets and with income inequality. Furthermore, the existence of a policy-insurance market may lead to a less equal distribution of income than where no insurance is available even if a majority of individuals are redistributing resources through private transfers.

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Additional Information:© 2010 by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association. Manuscript received February 2007; revised March 2008. I am grateful to Bob Inman, Andrew Postlewaite, Frank Schorfheide, and in particular to Antonio Merlo for their comments and encouragement. I also thank Mike Alvarez, Marco Cozzi, Alfredo Di Tillio, Federico Echenique, Jan Eeckhout, Jacob Goeree, Daniela Iorio, Matt Jackson, Dirk Krueger, Preston McAfee, Elena Pastorino, Nicola Persico, and two anonymous referees. All usual disclaimers apply. Please address correspondence to Andrea Mattozzi. Formerly SSWP 1229.
Subject Keywords:Income distribution, Income inequality, Insurance policies, Income redistribution, Economic uncertainty, Securities markets, Securities trading, Market equilibrium, Voting, Trade
Issue or Number:1
Record Number:CaltechAUTHORS:20171211-133711487
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:83808
Deposited By: Jacquelyn Bussone
Deposited On:20 Dec 2017 18:24
Last Modified:03 Oct 2019 19:11

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