Political Reinforcement: How Rising Inequality Curbs Manifested Welfare Generosity

We propose a political reinforcement hypothesis, suggesting that rising inequality moves party politics to the right on welfare state issues, strengthening the impact of inequality rather than modifying it. To establish the hypothesis we model pol-icy platforms by incorporating ideology and opportunism of party members, and interests and sympathies of voters. If welfare spending, such as social insurance, is a normal good within each income class, a majority of the electorate moves right-wards when wage inequality increases. As a response the left bloc, and to a lesser extent the right bloc, shift their welfare policy platform towards less generosity. Confronting our arguments with data on the welfare policy platforms of political parties in 22 OECD countries prior to 120 elections, we find strong support for a rightward shift of the left bloc, while the shift is less clear for the right bloc