Majority Preference for Subsidies over Redistribution

Among other activities, democratic governments redistribute resources directly through tax schemes that explicitly benefit the poor and indirectly through subsidizing particular goods and services that do not. Indeed, in some cases the effective redistribution under subsidy policies is clearly away from the poor. This paper studies when a majority might prefer subsidy policies over direct income redistribution in economies with mean greater than median income. The main result is a set of necessary and sufficient conditions for subsidies to be majority preferred to direct redistribution: in sum, subsidies are strictly majority preferred to redistribution when the gap between median and mean incomes is not too great.