Social Preferences and Redistribution under Direct Democracy

University of Leicester, Department of Economics Working Paper No. 08/11

39 Pages Posted: 13 May 2008

See all articles by Sanjit Dhami

Sanjit Dhami

University of Leicester

Ali al-Nowaihi

University of Leicester - Department of Economics

Date Written: April 15, 2008

Abstract

There is growing evidence on the roles of fairness and social preferences as fundamental human motives, in general, as well as in voting contexts. In contrast, models of political economy are based on selfish-voters who derive utility solely from own payoffs. We examine the implications of introducing voters with social preferences, as in Fehr and Schmidt (1999), in a simple general equilibrium model with endogenous labour supply. We demonstrate the existence of a Condorcet winner for voters, with heterogeneous social preferences (including purely selfish preferences), using the single crossing property of voters' preferences. Relatively small changes in the preference of voters can have relatively large redistributive consequences. We derive implications for the size of the welfare state; regional integration; and issues of culture, identity and immigration.

Keywords: Direct democracy, redistribution, other-regarding preferences, single crossing property

JEL Classification: D64, D72, D78

Suggested Citation

Dhami, Sanjit and al-Nowaihi, Ali, Social Preferences and Redistribution under Direct Democracy (April 15, 2008). University of Leicester, Department of Economics Working Paper No. 08/11, Available at SSRN: https://ssrn.com/abstract=1130791 or http://dx.doi.org/10.2139/ssrn.1130791

Sanjit Dhami (Contact Author)

University of Leicester ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

HOME PAGE: http://www2.le.ac.uk/departments/economics/people/sdhami

Ali Al-Nowaihi

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

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