LEFT, RIGHT, LEFT: INCOME DYNAMICS
AND THE EVOLVING
POLITICAL PREFERENCES OF
Paper No' EOPP 034:
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Keywords: income dynamics; redistributive politics, polarization, Bayesian
learning, Latin America.
JEL Classification: D31, D72, D83, P16.
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This Paper is published under the following series:
Economic Organisation and Public Policy
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The political left turn in Latin America, which lagged its transition to liberalized
market economies by a decade or more, challenges conventional economic
explanations of voting behavior. While the implications of upward mobility for the
political preferences of forward-looking voters have been studied, neither the
upward mobility model nor conventional myopic median voter models are well
equipped to explain Latin America’s political transformation. This paper generalizes
the forward-looking voter model to consider a broad range of dynamic processes.
When voters have full information on the nature of income dynamics in a transition
economy, we show that strong support for redistributive policies will materialize
rapidly if income dynamics offer few prospects of upward mobility for key sections
of the electorate. In contrast, when voters have imperfect information, our model
predicts a slow and politically polarizing shift toward redistributive voter
preferences under these same non-concave income dynamics. Simulation using
fitted income dynamics for two Latin American economies suggests that the
imperfect information model better accounts for the observed shift back to the left in
Latin America, and that this generalized, forward-looking voter approach may offer
additional insights about political dynamics in other transition economies.