chapter  3
28 Pages

Theoretical Foundations: Territorial Political Incentives and the Limits to Redistribution

The Analytical Framework: Elements and Premises I start with an inductive exercise: under what conditions will democratic governments respond to income inequality with redistributive policy? The answer to this question may seem obvious-democracy implies responsiveness to the needs and wants of the majority of citizens, rendering redistribution essentially automatic as inequality grows (Romer 1975, Meltzer and Richard 1981). However, a very large literature in the social sciences shows that redistribution is not a certain output of democratic representation. Rather, inequality may heighten political conflict and lead those who stand to lose from redistribution to vigorously protect the status quo in democracies (Aysan 2005). High inequality may lead elites to block democratization in the first place (Acemoglu and Robinson 2006) or to limit state capacity to reduce the ability of the state to redistribute once democracy is in place (Soifer 2013). A look around the world suggests that achieving high levels of income redistribution, even in societies that can plausibly afford it and with politically empowered citizens, is unusual. Extensive fiscal redistribution is uncommon and primarily European. How can we explain why a set of policies that should ostensibly be so popular in nearly every nation remains so rarely put into place? Existing literature on redistribution has offered many necessary conditions for redistributive policy. The following list provides as close to a full account as I can piece together from the literature.