Will democracy support switching from targeting to universalism?

Abstract

This paper takes advantage of Ide, Furuichi, and Miyazaki’s policy proposal to present a theoretic framework for analyzing the likelihood that a democratic society will support moving social policies from targeting to universal access. The main finding is that the proposed transition to universalism will likely increase Japan’s already substantial fiscal deficit and that it will appease social cleavages only if the psychological feeling of equal treatment is large enough to compensate the poor citizen’s utility loss. However, if the equal-treatment feeling is not high enough, then both the poor and the middle class will be dissatisfied with the transition proposal, which will not gather social support.

Keywords:

• Fiscal policy reform
• public deficit
• redistribution
• targeting
• universalism

Acknowledgments

The author is grateful to Keiichi Yamazaki for his comments and support and to an anonymous referee for insightful and important suggestions.

Notes

1 More precisely, 226.33% according to OECD: http://stats.oecd.org/Index.aspx?DataSetCode=SOCX_AGG

2 See Ministry of Foreign Affairs: http://www.mofa.go.jp/policy/economy/japan/reform-m.html or RIETI: http://www.rieti.go.jp/en/events/04031101/nakabayashi.html

3 Free translation. We borrow the term “All for all” from Rothstein and Uslaner (2005).

4 However, Chiavacci (2008) stresses that “empirical studies on income distribution and social mobility do not support a fundamental transformation of Japan from a general middle-class society to a divided society.”

5 https://basicincome.org/basic-income/history/

6 The two-class model is the simplest way to characterize differences in wealth among citizens. However, it is straightforward to extend it to any finite number of classes. Persson and Tabellini (2002, chapter 3) uses a generic n-class approach whereas Portugal and Bugarin (2007) uses a three-class model: the poor, the middle class and the rich. In the context of IFM16, the “middle class” would correspond to Japan’s middle class whereas the “poor” would correspond to the poorer citizens in urban areas and the citizens living in rural Japan.

7 This is the most general way of characterizing an economic agent who also has political concerns. For more on this topic, see Ferejohn (1986) or Bugarin (2003).

8 We denote by $H_g^{-1}$ and by $B_b^{-1}$ the inverse functions of the derivatives $H_g$ of H and $B_b$ of $B,$ respectively.

9 Rogoff (1990) uses two such random variables, one for each party. However, what really matters is the difference of these two variables. Therefore, we follow the equivalent but simpler one-random-variable approach of Persson and Tabellini (2002).

10 A more general analysis with different levels of heterogeneity is available upon request to the author.

11 One most stress that recent works have been challenging this finding. See Alesina and Guiliano (2011) for a more empiric analysis and Moene and Wallerstein (2001, 2003) for a more theoretical discussion.

12 A coefficient ${\zeta }_M>1=\mathrm{ }{\zeta }_L$ means that the middle class values the targeted public services more than the policy’s target, the lower income citizens. This obviously does not reflect reality well; quite to the contrary, we expect that ${\zeta }_M<1=\mathrm{ }{\zeta }_L$ but the present model only assumes that ${\zeta }_M\le 1=\mathrm{ }{\zeta }_L.$

13 Higher values for ${\zeta }^M$ from 0.2 to 1 yield positive net utilities for middle class.

14 https://www.weekly-economist.com/20171024pickup2/

15 The author is grateful to an anonymous referee for suggesting the extensions presented in this section.

16 See, for example, professor Ide’s interview to the Japanese journal Weekly Economist discussed in Section “The fiscal effect of the “all for all” reform.”

Additional information

Funding

The author gratefully acknowledges Brazilian CNPq’s “Produtividade em Pesquisa” research grant and the Fundação de Apoio à Pesquisa do Distrito Federal, FAP-DF for post-doc research support. All opinions and errors are the author’s sole responsibility.