DP11916 Inequality, redistribution and cultural integration in the Welfare State
This paper constructs a simple theoretical political economy model to analyze the
dynamic interactions between redistribution, public good provision and cultural integration
of minority groups. Cultural differentiation erodes the support for general
public good provision and vertical redistribution, reducing in turn the attractiveness
of adoption of the mainstream culture by the minority groups. Our model shows the
possibility for multiple politico-cultural steady state trajectories depending strongly
on the initial degree of cultural differentiation in the society. An exogenous increase
in income inequality is shown to increase the likelihood of multiple steady state trajectories.
In a context with multiple minority groups, culltural fragmentation favors
integration into the mainstream culture.
