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American Economic Review: Vol. 90 No. 1 (March 2000)
AER Volume. 90, Issue 1 | 
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Unequal Societies: Income Distribution and the Social Contract
Article Citation
Benabou, Roland. 2000. "Unequal Societies: Income Distribution and the Social Contract."
American Economic Review,
90(1): 96-129.
DOI: 10.1257/aer.90.1.96
DOI: 10.1257/aer.90.1.96
Abstract
This paper develops a theory of inequality and the social contract aiming to explain how countries with similar economic and political "fundamentals" can sustain such different systems of social insurance, fiscal redistribution, and education finance as those, of the United States and Western Europe. With imperfect credit and insurance markets some redistributive policies can improve ex ante welfare, and this implies that their political support tends to decrease with inequality. Conversely, with credit constraints, lower redistribution translates into more persistent inequality; hence the potential for multiple steady states, with mutually reinforcing high inequality and low redistribution, or vice versa.
Article Full-Text Access
Full-text Article
Authors
Benabou, Roland (Princeton U and Centre, NBER, and CEPR)
JEL Classifications
D31: Personal Income, Wealth, and Their Distributions
P16: Capitalist Systems: Political Economy
I22: Educational Finance
E62: Fiscal Policy
P16: Capitalist Systems: Political Economy
I22: Educational Finance
E62: Fiscal Policy
