Fairness and direct democracy
reportposted on 28.01.2010, 16:42 by Sanjit Dhami, Ali al-Nowaihi
The median voter model (direct democracy) has wide applicability, but it is based on sel sh voters i.e. voters who derive utility solely from own payo¤. The recent literature has pointed to fairness and concern for others as basic human mo- tives that explain a range of economic phenomena. We examine the implications of introducing fair voters who have a preference for fairness as in Fehr and Schmidt (1999). Within a simple general equilibrium model, we demonstrate the existence of a Condorcet winner for fair voters using the single crossing property of voters preferences. In a fair voter model, unlike a sel sh voter model, poverty can lead to increased redistribution. Mean preserving spreads of income increase equilibrium redistribution. Greater fairness leads to greater redistribution. The introduction of sel sh voters in an economy where the median voter is fair can have a large impact on the redistributive outcome. An empirical exercise using OECD data illustrates the potential importance of fairness in explaining redistribution.