Working paper 37: When the manger is empty

Abstract

Following median voter theory, a democratic system with full equality in the distribution of political power and with non-altruistic voters will lead to full redistribution, if median voter income is less than average income. In a welfare state like Denmark the winners of the redistribution game are the receivers of public welfare and public employees. Our assumption is that these groups of voters will form a welfare coalition voting for the largest possible redistribution. The optimal size of the welfare coalition is marginally more than 50 percent of all voters. The Danish welfare coalition has grown to become larger than optimal, and the increased pressure on the municipal budgets after 2010 has made a reduction in the redistribution system necessary. However, due to the majority held by the welfare coalition, this is a democratic impossibility... This demonstrates, that the hypothesis of the welfare coalition as a determinant of the total size of the welfare system can be confirmed in the Danish municipalities. Furthermore, it shows that the composition of the welfare coalition determines how the burden of reductions is shared between the public employees and the receivers of public welfare.