Policy Uncertainty, Electoral Securities and Redistribution
نویسنده
چکیده
The paper investigates how ex-ante uncertainty about a government policy with redistributive consequences will influence the proportion of agents in favor of it, if agents can trade policy contingent securities. If a subset of agents can insure against policy uncertainty, support for redistributive policies is always smaller than in a case where no insurance is available. Both the relation between initial inequality and redistribution and the inequality of the expected income distribution after policy uncertainty is resolved depend on the size of the insurance market. Suggestive evidence for the existence and the effects of a “political insurance market” for the US economy are provided.
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