Updated June 2016
I investigate the effects of population ageing on immigration policies. Voters' attitude towards immigrants depends on how the net gains from immigration are divided up in the society by the fiscal policy. In the theoretical literature this aspect is treated as exogenous to the political process because of technical constraints. This generates inconsistent predictions about the policy outcome. I propose a new equilibrium concept for voting models to analyse the endogenous relationship between immigration and fiscal policies and solve this apparent inconsistency. I show that the elderly and the poor have a common interest in limiting immigration and in increasing public spending. This exacerbates the effects of population ageing on public finances and results in a high tax burden on working age individuals and further worsens the age profile of the population. Moreover, I show that if the share of elderly population is sufficiently large, then a society is unambiguously harmed by the tightening in the immigration policy caused by the demographic change. Finally I show that the implications of the model are consistent with the patterns observed in UK attitudinal data and in line with the findings of the empirical literature about migration.
I propose a model of endogenous political parties. The role of parties is to increase the ability of politicians to commit to policy platforms. The policy space is multidimensional and voter's preferences may not be single-peaked. I characterize the types of party structure that can be stable and amongst them, the structures that are robust to preference perturbations. Moreover, I provide a general characterization of the policy outcome and its comparative statics. I show that the position of the status quo in the policy space is crucial in determining whether parties play any role in shaping policies. In contrast to similar models in the literature, I show that the presence of parties can block reforms that would be feasible if parties did not exist. Conversely, the extent to which parties can increase the set of possible policy reforms is severely limited or null. Lastly, I discuss the robustness of these results, and I compare them to the ones of alternative models in the literature.Previous Version 2: December 2016
I investigate the relationship between income inequality and size of the public sector in a theoretical framework. I extend the Meltzer-Richard model of public intervention in redistribution allowing for two different kinds of public spending. Specifically, voters choose - through the political process - a two-dimensional policy consisting of a linear tax on labour income and of the provision of a Public Good. Under the assumption of balanced governmental budget, these two choices determine the amount of a uniform lump-sum grant. The multidimensionality of the policy space implies that the traditional Median Voter Theorem does not hold. I adopt the model of electoral competition proposed by Dotti (2015) to tackle such problem. I show that, if in the proximity of a political equilibrium the endogenous progressivity of the tax system is sufficiently low, then a rise in the median-to-mean income ratio increases the size of the government. This prediction has opposite sign relative to the one in the traditional analysis. Moreover, I show that the progressivity of the tax system is increasing in the median-to-mean income ratio. Such results are consistent with most findings in the empirical literature.
I study the relationship between income inequality and public intervention in education in a probabilistic voting model. Traditional Political Economy models typically imply a positive relationship between income inequality and public intervention in redistributive policies. Empirical evidence suggests that this may hold true only for certain kinds of policies, such as public education, but it may not hold true for other forms of public intervention. I propose a method to study the sign of this this relationship in the case in which forms of redistribution other than the public provision of education are available to voters. Moreover, I allow consumers to opt-out of the public education system and get private education. This feature of the public provision of education plays a crucial role in shaping the results. I show that an increase in income inequality causes a rise in governmental intervention in education if the expected marginal returns to education are larger for children of low income parents. This finding is is consistent with the results in the empirical literature about public investment in education. Moreover, I show that the policy adjustment tends to reduce future inequality. Lastly, I show that for other kind of publicly provided goods, such as Health care, the relationship has ambiguous or opposite sign.