Abstract
This paper extends the median voter model to include risk aversion. An expected utility maximizing median voter with an aversion to risk may behave differently than a median voter who is certain. A referendum on income redistribution from the top of the distribution to the bottom which fails when the median voter is certain may pass in the extended median voter model. Economic inefficiencies and the net losses accompanying redistribution are shown to play a pivotal role in determining the behavior of the risk averse median voter. The model is illustrated using a one percent Demogrant redistribution.
The major motive for government income transfers in the modern world, and in fact throughout history, is simply that the recipients of the money would like to get it and they have the political power ... to implement their desires.
Gordon Tullock (1983: 2)
Because political transfers seem to violate the standard Pareto norms, we have tended to opt out of any discussion and to say that nothing further can be constructed on the basis of individual evaluations. Once the franchise has been extended to all adults, and once the constitution has allowed income transfers to take place collectively, the formal act of transfer becomes fully predictable from positive economic analysis. The basic property right inheres in the voting franchise ...
James M. Buchanan (1984: 187)
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Bishop, J.A., Formby, J.P. & Smith, W.J. Incomplete information, income redistribution and risk averse median voter behavior. Public Choice 68, 41–55 (1991). https://doi.org/10.1007/BF00173818
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DOI: https://doi.org/10.1007/BF00173818