Debunking the Myths of Political Responses to Income Inequality

This dissertation focuses on the political responses to income inequality. Multiple critical puzzles existing in the political economy of inequality are solved in three essays. Firstly, why low-income voters do not punish the incumbent in economic voting for rising inequality when income inequality is detrimental to them. The answer is the conditional benchmarking in incumbent vote. By adding a component emphasizing group-level heterogeneity in the selection model, this dissertation provides the first attempt to link inequality and the competency theory. With the EITM framework, it is argued that individual voters benchmark their group’s income growth against the national rate to reward or punish the incumbent. The effect of this benchmarking is conditional on the context of inequality growth. The evidence based on the ANES data shows that the poor hold the incumbent accountable for unfavorable distributions of income growth. But their punishment upon the incumbent is less often when domestic inequality growth is lower than that abroad. Secondly, why redistributive preferences turn more convergent between the rich and the poor, while standard models imply the opposite. In contrast to influential approaches, the key here is the discrepancy between actual and just inequality in individual perceptions. By developing a multidisciplinary model, this dissertation argues that the discrepancy gives rise to individual justice evaluations about inequality, triggering behavioral consequences regarding redistribution. Using the EITM framework and individual-level data from multi-wave surveys (ISSP), it is found that high supports for redistribution emerge among the rich because they perceive greater actual inequality relative to just levels than the poor. Lastly, why continuous unabated inequality presents in the US if the government is capable of changing distributive outcomes. This question is addressed through investigating the causal directions and dynamic relations of inequality, policy specific moods, and government redistribution. Unlike current consensus of the emphasis on mass preferences or government responsiveness across income groups, this dissertation proposes that redistribution is not responsive to rising inequality because policy specific moods disconnect them. Inequality causes tax policy moods but not social welfare policy moods, whereas government redistribution is simply determined by the mood of social welfare policy.