Strategic Political Participation and Redistribution

The purpose of this paper is to study formation of support and opposition to redistribution. We analyze a society with two groups of citizens and a government. The government distributes income from one group to the other in response to political pressure. The interaction between the groups is modeled as a two-stage game. In stage 1, the groups decide if they want to be politically active. In stage 2, the active group or groups seek influence on the direction and size of the transfer. We demonstrate that supporters of redistribution are always politically active but that opposition is often absent. Moreover, when opposition is absent there is a strong tendency for underdissipation of the transfer, while political competition typically leads to overdissipation.