Labor Market Institutions and Redistributive Voting

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In the median-voter model of redistributive voting, an increase in the skewness of the income distribution will lead to more redistribution. Skewness is almost always assumed to be identical to inequality. But this will only be true under specific assumptions, and it is possible for an increase in inequality to be associated with a decrease in skewness. In general then, the relationship between inequality and skewness -- and therefore redistribution -- is ambiguous. This paper resolves this indeterminacy by introducing labor market frictions and labor market institutions into a redistributive voting framework. Under specific conditions, labor market institutions will lower inequality, but increase skewness -- and therefore redistribution. This novel result resolves a "paradox" of redistribution, challenges the prevailing interpretation of the median-voter model, and reconciles the empirical data with the basic logic of that model.

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