26 November 2012
Ex Boccherini - Piazza S. Ponziano 6 (Conference Room )
Research suggests that in the US legislators represent their richer constituents. We show theoretically that this is due to the institutional structure in the US, in which legislators are expected to provide particularistic benefits to their constituents. In particular, we develop a citizen-candidate model of redistribution between both rich and poor citizens, and between legislative districts, where citizens that are more productive in the private sector are also more effective at directing transfers to their district if elected to the legislature. When competition between legislators to secure funds for their districts is weak, tax rates are set by the median voter of the median district. However, when competition between legislators becomes fierce, all districts prefer legislators who are successful in the private sector as each legislator has only a small effect on broad policies, like the tax rate, but a big effect on the welfare of the district. As these citizen-candidates will be richer than the median voter of the median district, this will lead, in equilibrium, to lower redistribution between rich and poor. We show that this result is exacerbated by larger legislatures, and cannot be prevented by (almost entirely) policy motivated parties that select candidates.