SOCIAL MOBILITY AND THE DEMAND FORREDISTRIBUTION: THE POUM HYPOTHESIS*R
This paper examines the often stated idea that the poor do not support highlevelsof redistributionbecauseof the hope thatthey, or their offspring,maymakeit up the income ladder.This “prospect of upward mobility”(POUM) hypothesisisshown to be fully compatible with rational expectations, and fundamentallylinked to concavity in the mobility process. A steady-state majority could even besimultaneouslypoorer than average in terms of current income, and richer thanaverage in terms of expected future incomes. A rst empirical assessment sug-gests, on the other hand, that in recent U. S. data the POUM effect is probablydominated by the demand for social insurance.
“In the future, everyone will be world-famous for fteen minutes”
[Andy Warhol 1968].
The following argument is among those commonly advancedto explain why democracies, where a relatively poor majorityholds the political power, do not engage in large-scale expropria-tion and redistribution. Even people with income below average,it is said, will not support high tax rates because of the prospectof upward mobility: they take into account the fact that they, ortheir children, may move up in the incomedistribution and there-fore be hurt by such policies.
For instance, Okun [1975, p. 49]relates that:
“In 1972 a storm of protest from blue-collar workers greeted Senator McGovern’s proposal for conscatory estate taxes.They apparently wanted some big prizes maintained in the game.
* We thank Abhijit Banerjee, Jess Benhabib, Edward Glaeser, Levent Koc¸k-esen, Ignacio Ortun˜o-Ortin, three anonymous referees, seminar participants atthe MassachusettsInstitute of Technology, and the Universities of Maryland andMichigan, New York University, the University of Pennsylvania, UniversitatPompeuFabra,PrincetonUniversity,and Universite´de Toulousefortheirhelpfulcomments. The rst author gratefully acknowledges nancial support from theNational Science Foundation (SBR–9601319), and the MacArthur Foundation.Both authors are grateful for research support to the C. V. Starr Center at New York University.1. See, for example, Roemer  or Putterman . The prospect of upward mobilityhypothesisis also relatedto the famous“tunnel effect” of Hirsch-man , although the argument there is more about how people make infer-ences about their mobility prospects from observing the experience of others.There are of course several other explanationsfor the broader questionof why thepoor do not expropriate the rich. These include the deadweight loss from taxation(e.g., Meltzer and Richard ), and the idea that the politicalsystem is biasedagainst the poor [Peltzman 1980; Be´nabou 2000]. Putterman, Roemer, and Syl- vestre  provide a review.
2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
The Quarterly Journal of Economics,