Robinson (2001): “Inefficient Redistribution

T here are many well-developed theories that explain why governments redistribute income, but very fewcan explain why this often is done in a socially inefficient form. In the theory we develop, comparedto efficient methods, inefficient redistribution makes it more attractive to stay in or enter a group that receives subsidies. When political institutions cannot credibly commit to future policy, and when the political influence of a group depends on its size, inefficient redistribution is a tool to sustain political power. Our model may account for the choice of inefficient redistributive policies in agriculture, trade, and the labor market. It also implies that when factors of production are less specific to a sector, inefficient redistribution may be more prevalent. There are many normative and positive theoriesthat explain why governments redistribute in-come. For example, most positive theories of politics typically involve a group that redistributes resources and income away from other groups to itself. Redistribution also may be undertaken for normative reasons; for example, the distribution of income and welfare generated by market outcomes may be judged unfair or undesirable by some ethical criterion. We lack a satisfactory understanding, however, of why redistribution often takes an inefficient form.