Inequality & Unemployment, Redistribution & Social Insurance, and Participation: A Theoretical Model and an Empirical System of Endogenous Equations

DEMOCRACY, INEQUALITY, AND REPRESENTATION, P. Beramendi & C. Anderson, eds., Russell Sage, Forthcoming

41 Pages Posted: 17 Jan 2008 Last revised: 25 Jan 2008

See all articles by Robert J. Franzese

Robert J. Franzese

University of Michigan

Jude C. Hays

University of Pittsburgh

Abstract

Conflicts of interest over the generosity and structure of redistribution and social insurance (call these jointly: social policy) include that between the relatively poor and wealthy - which theoretically produces the famous median-voter result that democratic demand for broad redistribution increases in the income skew - and that between the safely employed and the unemployed and precariously employed - which yields a different theoretical result, namely that inequality reduces median-voter demand for social insurance. In each case, the generosity and structure of social policy may itself affect simultaneously the efficiency of the labor market and the political participation of society's less fortunate, which affects the identity and so the income and job-security status of the median voter. These considerations imply several endogenous relationships between economic performance (employment/income level and distribution), social policy (redistribution and social insurance), and political participation. This paper will elaborate the theoretically expected nature of these endogenous relationships, suggest identification conditions that derive from the theory and substance, and offer empirical estimates of the resulting system of equations.

Keywords: Redistribution, Social Insurance, Inequality, Unemployment, Participation, System of Equations

JEL Classification: C30, H53, H55, J65

Suggested Citation

Franzese, Robert J. and Hays, Jude C., Inequality & Unemployment, Redistribution & Social Insurance, and Participation: A Theoretical Model and an Empirical System of Endogenous Equations. DEMOCRACY, INEQUALITY, AND REPRESENTATION, P. Beramendi & C. Anderson, eds., Russell Sage, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1084093

Robert J. Franzese (Contact Author)

University of Michigan ( email )

Ann Arbor, MI 48109
United States
734-936-1850 (Phone)
734-764-3341 (Fax)

HOME PAGE: http://www-personal.umich.edu/~franzese/

Jude C. Hays

University of Pittsburgh ( email )

135 N Bellefield Ave
Pittsburgh, PA 15260
United States

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