ECONOMY

john londregan 97
Notice that the archetypal social welfare function for the left, S0 L ({c g } G g =1 ), which is
largest when the variance of consumption levels is smallest, depends on the consumption
level of each group.
Now let’s turn to the archetypal social welfare function for the right. This welfare
function cares only about minimizing the inefficiencies implied by taxation and
transfers. These are modeled as increasing with the square of the gap between an
individual’s actual consumption level, c, and her endowment, y, yielding a loss of
−(y − c) 2 . As all members of the same group g have the same endowment, y g ,and
the same consumption level, c g , the contribution of the N g members of group g to
the deadweight losses is N g (c g − y g ) 2 . When we add up these deadweight losses for
all the groups we have the archetypal rightist social welfare function S0 R({c g , y g } G g =1 ):
S R 0 ({c g , y g } G g =1 )=−G g =1 N g (c g − y g ) 2 (9)
Political parties (and individuals) in the Dixit and Londregan (1998) modelcare
about both inefficiencies and inequality, but those on the right place more weight on
inefficiencies, while their counterparts on the left place greater weight on inequality.
Voters also differ in the relative weights they place on both sets of considerations. A
type ˜ voter in group g will side with the party whose promised redistributive scheme
offers the highest value for:
·g c g +(1− ˜)S L 0 ({c g } G g =1 )+˜S R 0 ({c g , y g } G g =1 ) (10)
Notice that in this framework 22 there is no longer a primitive preference for one party
or the other. Instead voters care about the transfer they receive, the level of taxes, and
the amount of inequality implied by each party’s proposed policies. However, voters
with higher values of ˜ will, all else equal, be more sympathetic to the goals of party
R, while lower values for ˜ predispose voters towards party L. There is a similarity
between ˜, the relative weight placed on the rightist welfare function, and X, the
partisan attachment to party R that was central to several of the models discussed
previously.
The parties choose redistributive schemes subject to the budget constraint in order
to maximize a payoff that depends on the value to them of being elected, and on
their preferences over the promised policy platform, which itself balances the goals
of efficiency and equality. All else equal, the party on the left will give more weight
to equality while the party on the right will place more emphasis on efficiency when
committing to taxes and transfers. More “power-hungry” parties will be less willing
to sacrifice votes in order to adopt ideologically pure platforms, and so they will more
aggressively favor blocks of swing voters.
²² As in several of the other models considered in this chapter, groups differ in their willingness to
sacrifice their most preferred distribution of income for greater private consumption benefits. Higher
values for · correspond to groups that are less concerned about the overall distribution of resources, as
compared with the level of their own personal consumption.