Manuel Pannier - A reform-oriented approach to political parties’ revealed social preferences

• Presenting author: Manuel Pannier (LMU Munich and ifo Institute)

• Authors: Felix Bierbrauer, Maximilian Blömer, Lilly Fischer, Emanuel Hansen, Manuel Pannier and Andreas Peichl

• Session: B02B - Public Choice [1] - Tuesday 11:00-12:30 - Marietta-Blau Hall

• Slides: PDF

We present a new approach to measure the redistributive preferences of political parties based on their election proposals. This approach builds on the marginal value of public funds (MVPF) framework. We recover the welfare weight associated with a small reform as the inverse of its MVPF. The aggregated welfare weights of multiple small reform proposals for each party and year provide measures of the parties’ redistributive preferences along the income distribution. Leveraging this approach, we use microsimulation to estimate the MVPFs and their associated welfare weights for more than 300 proposed modifications to the tax-transfer system by Germany’s five largest parties from 1990 until 2021. Our results show that German political parties broadly assign higher welfare weights to low-income earners and do not specifically target middle incomes as suggested by political economy arguments.