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Redistributive Politics and Economic Efficiency

Published online by Cambridge University Press:  02 September 2013

Avinash Dixit  and
John Londregan
Avinash Dixit
Affiliation:
Princeton University
John Londregan
Affiliation:
Princeton University
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Abstract

The political process often compensates the losers from technical change or international competition in an economically inefficient way, namely by subsidizing or protecting declining industries instead of encouraging the movement of resources to other more productive uses. We find that a dynamic inconsistency in the game of redistributive politics contributes to this outcome. To achieve economically efficient outcomes, it is necessary that those making economically inefficient choices not be given offsetting transfers. But the political process distributes income on the basis of political characteristics, which are in general different from the economic characteristics that are rewarded by the market. We identify circumstances in which the inefficient choosers have desirable political characteristics and are therefore immune from threats of having to face the economic consequences of their choices.

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Articles
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American Political Science Review , Volume 89 , Issue 4 , December 1995 , pp. 856 - 866
Copyright
Copyright © American Political Science Association 1995

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