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Incomplete Information, Income Redistribution and Risk Averse Median Voter Behavior.



This paper extends the median voter model to include risk aversion. An expected utility maximizing median voter with an aversion to risk may behave differently than a median voter who is certain. A referendum on income redistribution from the top of the distribution to the bottom that fails when the median voter is certain may pass in the extended median voter model. Economic inefficiencies and the net losses accompanying redistribution are shown to play a pivotal role in determining the behavior of the risk-averse median voter. The model is illustrated using a one percent Demogrant redistribution. Copyright 1991 by Kluwer Academic Publishers

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