An Interest Group Model of Direct Income Redistribution

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Abstract
An interest group model of the determinants of policies which directly redistribute income at low income persons is developed and tested. The model assumes that altruistic taxpayers, non-altruistic taxpayers and needy beneficiaries form separate interest groups from which politicians seek support. Benefit levels depend on variables such as taxpayer income and the price of benefits but, unlike median voter models, the model also implies a role for interest group strength and competition between political parties. The author uses latent variable methods and data on the Aid to Families with Dependent Children program to demonstrate empirical support for the model.

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