Redistributive politics under optimally incomplete information

• Main Author: Gabrieli, Tommaso
• Published: University of Warwick 2008
• Subjects: 330.015195; HB Economic Theory : JC Political theory
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.524355

This thesis wants to contribute to the understanding of the role of collective beliefs and incomplete information in the analysis of the dynamics of inequality, growth and redistributive politics. Extensive evidence shows that the difference in the political support for redistribution appears to reflect a difference in the social perceptions regarding the determinants of individual wealth and the underlying sources of income inequality. The thesis presents a theoretical framework of beliefs and redistribution which explains this evidence through multiple politico-economic equilibria. Differently from the recent literature which obtains multiple equilibria by modeling agents characterized by psychological biases, my framework is based on standard assumptions. Multiple equilibria originate from multiple welfare maximizing levels of information for the society. Multiplewelfare-maximizing levels of information exist because increasing the informativeness of an economy produces a trade-off between a decrease in adverse selection and an increase in moral hazard. The framework provides a new micro-foundation of incomplete information as an institutional feature and answers various macroeconomic policy questions with different models.