DP2122 Inefficient Redistribution

Author(s):	Daron Acemoglu, James A Robinson
Publication Date:	April 1999
Keyword(s):	Democracy, Efficiency, Redistribution
JEL(s):	D72, H21, J38
Programme Areas:	International Macroeconomics, Public Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=2122

There are many well developed theories which explain why governments redistribute income. There are very few theories, however, which can explain why this redistribution often takes an inefficient form. In this paper we develop a theory of why redistribution is made inefficiently. Inefficient redistribution makes staying in or entering a group relatively more attractive than efficient methods of redistribution. The form of redistribution is therefore a tool to sustain political power in situations where; (1) the political influence of a group depends on its size, and (2) political institutions cannot credibly commit to future policy. We argue that the mechanism we propose may account for the choice of inefficient redistritive policies in agriculture, trade and the labor market.