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Inequality and Media Capture

- January 17, 2008

If income inequality is going up in a country, the lower class (and probably the middle-class too) would like some sort of income redistribution to reduce the rising levels of income inequality. So why do some countries have higher levels of income inequality than others? One explanation, of course, is that the institutional structure in certain countries limits the influence of the lower-class to obtain their preferred policy of higher levels of redistribution. Maria Petrova, a PhD candidate at Harvard University’s Political Economy and Government department, has another explanation. She writes in The Journal of Public Economics that the lower-class misperceives their self-interest to increase levels of redistribution. Why? She argues,

Unequal societies may have a low level of redistribution because the median voter may misperceive her self-interest
as a result of an information campaign by the rich. Higher inequality in the economy implies more incentive for the rich to manipulate the preferences of voters and to use the power of the media to advocate a lower level of taxation. The influence of the rich on the media is one reason why income inequality leads to political inequality, and why policy outcomes are more responsive to the preferences of the rich than to those of the poor.

Is there evidence in the US? As Petrova notes,

– Bartels (2005) finds that the public support for the estate tax repeal in the US can be explained by “unenlightened self-interest”. He shows that most people with low and middle incomes have limited information about the tax, and that support for the tax repeal, which is not in their self-interest, is decreasing with the level of information which they have (ungated).

– Gilens, (2005) shows, using survey data, that the preferences of Americans with high-income have much greater influence on policy outcomes than Americans with low income (ungated and gated); Bartels (2006) finds a similar effect for roll-call votes (ungated).

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