Does Democracy Inevitably Lead to Aggressive Redistribution? A Family Perspective

This paper explains why democracies marked by inequalities may not experience aggressive redistribution through the lens of parent-child interactions. Parental concerns about the negative impacts of high taxation on their children’s motivation to study and pursue high-paying careers deter the poor majority from harboring an inclination to expropriate the rich. We construct an overlapping generations model in which workers vote on the redistributive policy under majority rule, while considering the incentive costs that the policy imposes on their children. We analyze the stationary Markov perfect equilibrium where the likelihood that a moderate income tax can be credibly enforced increases with the degree of parental altruism. In an extended model where career prospects are jointly determined by study efforts and received educational resources, we provide ananalytical and numerical characterization of the conditions under which full redistribution does not materialize in the steady state under both private and public school systems.