The Evolution of Ideology, Fairness and Redistribution
ABSTRACT This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
- [show abstract] [hide abstract]
ABSTRACT: This paper studies political equilibrium in a two-party representative democracy in which the political parties are policy motivated and voters trade off their policy preferences against their ‘party identity’. It is shown that the parties will in general adopt differing policy positions in equilibrium, and that, under certain qualifications, the winning policy will lie between the more popular party's preferred policy and a certain utilitarian optimum. The winning policy will be closer to this utilitarian optimum the less biased the electorate is in terms of ‘party identification’.Journal of Public Economics. 02/1993;
Article: Fairness and Redistribution[show abstract] [hide abstract]
ABSTRACT: Different beliefs about the fairness of social competition and what determines income inequality influence the redistributive policy chosen in a society. But the composition of income in equilibrium depends on tax policies. We show how the interaction between social beliefs and welfare policies may lead to multiple equilibria or multiple steady states. If a society believes that individual effort determines income, and that all have a right to enjoy the fruits of their effort, it will choose low redistribution and low taxes. In equilibrium, effort will be high and the role of luck will be limited, in which case market outcomes will be relatively fair and social beliefs will be self-fulfilled. If, instead, a society believes that luck, birth, connections, and/or corruption determine wealth, it will levy high taxes, thus distorting allocations and making these beliefs self-sustained as well. These insights may help explain the cross-country variation in perceptions about income inequality and choices of redistributive policies.American Economic Review 01/2005; 95(4):960-980. · 2.69 Impact Factor
NBER WORKING PAPER SERIES
THE EVOLUTION OF IDEOLOGY, FAIRNESS AND REDISTRIBUTION
Alberto F. Alesina
Working Paper 15587
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
The views expressed herein are those of the author(s) and do not necessarily reflect the views of the
National Bureau of Economic Research.
NBER working papers are circulated for discussion and comment purposes. They have not been peer-
reviewed or been subject to the review by the NBER Board of Directors that accompanies official
© 2009 by Alberto F. Alesina, Guido Cozzi, and Noemi Mantovan. All rights reserved. Short sections
of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full
credit, including © notice, is given to the source.
The Evolution of Ideology, Fairness and Redistribution
Alberto F. Alesina, Guido Cozzi, and Noemi Mantovan
NBER Working Paper No. 15587
JEL No. H0,H1
Ideas about what is "fair" above and beyond the individual's position in the income ladder influence
preferences for redistribution. We study the dynamic evolution of different economies in which redistributive
policies, perceptions of fairness, inequality and growth are jointly determined. We show how including
fairness explains various observed correlations between inequality, redistribution and growth. We
also show how different beliefs about fairness can keep two otherwise identical countries in different
development paths for a very long time.
Alberto F. Alesina
Department of Economics
Littauer Center 210
Cambridge, MA 02138
University of Glasgow
Adam Smith Building
Glasgow, G12 8RT
The Evolution of Ideology, Fairness and
Alberto Alesina?, Guido Cozziy, and Noemi Mantovanz
December 3, 2009
Ideas about what is "fair" above and beyond the individuals’ position
in the income ladder in‡uence preferences for redistribution. We study
the dynamic evolution of di¤erent economies in which redistributive poli-
cies, perception of fairness, inequality and growth are jointly determined.
We show how including fairness explains various observed correlations be-
tween inequality, redistribution and growth. We also show how di¤erent
beliefs about fairness can keep two otherwise identical countries in di¤er-
ent development paths for a very long time.
The poor want to tax the rich, but that is not all what determines redistributive
policies.Ideas about what is "fair" and about what is an acceptable level of
inequality above and beyond the individuals’ position in the income ladder also
matter.1The same level of inequality may be more or less acceptable by di¤erent
individuals in di¤erent countries depending upon their beliefs that wealth has
been accumulated with e¤ort and ability rather than by luck, connections or
even corruption. In one word whether di¤erent levels of income and wealth are
"deserved" or not.2These views about inequality and justice (which we may
label "ideology") determine tax rates and the evolution of the distribution of
income and wealth. But the latter itself generates changes in the proportion of
wealth inequality due to e¤ort or to other factors including luck and government
intervention, thus changing individual views about redistribution.
?Harvard University and IGIER
zUniversity of Glasgow
1See for instance the recent survey of preferences for redistribution by Alesina and Giuliano
(2010) and the references cited therein.Alesina, Di Tella and McCulloch (2004) discuss
di¤erent levels of inequality tolerance in various countries. Alesina and Glaeser (2004) focus
on a comparison between Continental Europe and US. Persson and Tabellini (2000) provide
an excellent overview of politico economic models of redistributive policies.
2See Fong (2001), Alesina and La Ferrara (2005) and Alesina and Giuliano (2010).
In this paper we provide a politico economic model that can trace over time
the evolution of polices (tax and transfer schemes), the evolution of inequal-
ity, and of the preferences for redistribution, as a function of changes in what
individuals perceive as fair and unfair wealth di¤erences. The introduction of
concerns for fairness reconciles several empirical observations which would be
inconsistent with models based upon individual income (and position in the
income ladder) as the only determinant of the voters’ views about taxes and
In our model di¤erent generations of voters are linked by bequests, thus re-
distributive policies in the past and past beliefs about what was fair in‡uence the
current generation’s preferences. We are especially interested in two issues. One
is how di¤erent initial conditions lead to long lasting di¤erences in policies. The
other one is how shocks to inequality imply di¤erent policy reactions.
ing the …rst issue we study not only di¤erences in the initial conditions of the
economic system, but also, and perhaps more interestingly, di¤erences in views
about social justice and about the fairness of the inherited level of inequality.
For instance two countries may be completely identical except for their views
about the fairness of their initial inequality, and as a result they may adopt
di¤erent redistributive policies over a long period of time which determines dif-
ferent wealth and inequality dynamics. These di¤erent patterns of taxation,
inequality, and growth would be completely unexplainable without reference to
initial views about what is fair or not, i. e. about social justice. These exam-
ples allow us to explain, for instance, di¤erent levels of redistribution between
the US and Europe and their persistence along the lines of Alesina and Glaeser
(2004) who stressed, informally, the role of the perception of poverty as an ex-
planation of US versus Europe. We also show that for some parameter values
economies with di¤erent initial beliefs but otherwise identical converge slowly to
the same steady state. But for other parameter values identical economies but
with di¤erent initial beliefs converge to two di¤erent steady states, thus their
di¤erences persist forever. Another implication of our model is that, contrary to
standard result from the Meltzer and Richard’s (1981) model, more inequality
may be associated with less redistribution. This is because di¤erent levels of
measured inequality may be considered more or less fair.3.
The second set of results concerns the e¤ect of shocks to wealth inequality
like those generated by wars (Piketty and Saez, 2003) or possibly the 2007-2009
…nancial crisis. Sudden exogenous shocks to inequality may generate very dif-
ferent policy reactions depending on the perception of individuals about who
lost and who gained, namely if those who lost were those who were rich be-
cause of "luck" (broadly de…ned) or were those who had become rich because
of e¤ort and ability. Thus the same changes in inequality may have di¤erent
e¤ects on redistributive policies depending on the nature of how these shocks
are perceived. An innovative feature of our model is that we can trace not only
the evolution of wealth, inequality, and redistributive policies, but also of the
3See in fact Perotti (1996) and Bénabou (1996) for empirical evidence regarding this rela-
views about "fairness" in society, that is we can measure how much of the total
inequality is considered fair at di¤erent points in time. We can also examine
the e¤ects of changes on people’s views about fairness.
This paper is related to the work of Alesina and Angeletos (2005a,b) but it
is richer in its dynamic dimension and it uses a di¤erent voting mechanism. We
adopt as our benchmark the same de…nition of fairness as theirs, but we also
analyze di¤erent de…nitions and we emphasize the transition to the steady state,
which may take a long time. Also, unlike those authors who use a median voter
model, we adopt a probabilistic voting framework, which is a more ‡exible tool
to analyze various types of distribution of political in‡uence. The in‡uence of
beliefs about e¤ort as a determinant of redistributive policies has been analyzed
in a di¤erent context by Bénabou and Tirole (2006). In their paper, beliefs are
not shaped only by actual data, but also by agents’ targets and psychological
The present paper is organized as follows. Section 2 describes the model:
both the economy and the political aspects of it, and the equilibrium. Section 3
illustrates the dynamic evolution of the model and performs several experiments.
The last section concludes. The Matlab codes used in the present paper are
available from the authors upon request.
2 The economy
We have non overlapping generations of individuals, indexed by t. Population is
constant, there is one active individual per-family, and the total mass of families
is normalized to one. Each individual, indexed by i 2 [0;1], lives for one period
and is characterized by a certain degree of endurance to e¤ort, ?i> 0, luck,
?i2 R, and inner abilities, Ai> 0; average luck is zero, that is
These family-speci…c variables are assumed, for now, fully persistent over time.
In an extension below we also allow for non persistent luck. Each individual i
cares about consumption, cit, and how much wealth to bequeath to the next
generation, kit- which we label "capital" - and negatively on his e¤ort, eit, on
the job. All choice variables are constrained to be non-negative. The private
utility function is:
?idi = 0.
(1 ? ?)1????c1??
0 < ? < 1. The …nal life gross wealth is:
zit= Aieit+ ?i+ kit?1. (1)
4In the present paper beliefs are consistent with reality. The fact that past experiences
and views about history a¤ect beliefs is consistent with Piketty (1995) who analyzes the
dependence of the redistributive preferences on past income.