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Median-voter Equilibria in the Neoclassical Growth Model under Aggregation

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Author Info

  • Marina Azzimonti
  • Eva de Francisco
  • Per Krusell

Abstract

We study a dynamic version of Meltzer and Richard's median-voter model where agents differ in wealth. Taxes are proportional to income and are redistributed as equal lump-sum transfers. Voting occurs every period and each consumer votes for the tax that maximizes his welfare. We characterize time-consistent Markov-perfect equilibria twofold. First, restricting utility classes, we show that the economy's aggregate state is mean and median wealth. Second, we derive the median-voter's first-order condition interpreting it as a tradeoff between distortions and net wealth transfers. Our method for solving the steady state relies on a polynomial expansion around the steady state. Copyright The editors of the "Scandinavian Journal of Economics" 2006 .

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 108 (2006)
Issue (Month): 4 (December)
Pages: 587-606

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Handle: RePEc:bla:scandj:v:108:y:2006:i:4:p:587-606

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Citations

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Cited by:
  1. Barnett, Richard & Bhattacharya, Joydeep & Bunzel, Helle, 2012. "Voting for immiserizing income redistribution in the Meltzer-Richard model," School of Economics Working Paper Series 2012-15, LeBow College of Business, Drexel University.
  2. Alessandro Riboni & Facundo Piguillem, 2011. "Dynamic Bargaining over Redistribution in Legislatures," 2011 Meeting Papers 1320, Society for Economic Dynamics.
  3. Jorge Soares, Marina Azzimonti, Pierre-Daniel Sarte & Pierre-Daniel Sarte & Jorge Soares, 2006. "Distortionary Taxes and Public Investment When Government Promises Are Not Enforceable," Working Papers 06-07, University of Delaware, Department of Economics.
  4. Lorenzo Burlon, 2014. "Public expenditure distribution, voting, and growth," Temi di discussione (Economic working papers) 961, Bank of Italy, Economic Research and International Relations Area.
  5. Graziella Bertocchi, 2007. "The vanishing bequest tax. The Comparative Evolution of Bequest Taxation in Historical Perspective," Center for Economic Research (RECent) 005, University of Modena and Reggio E., Dept. of Economics.
  6. Daniel R. Carroll, 2013. "The demand for income tax progressivity in the growth model," Working Paper 1106, Federal Reserve Bank of Cleveland.
  7. John Creedy & Shuyun May Li & Solmaz Moslehi, 2008. "The Composition of Government Expenditure in an Overlapping Generations Model," Department of Economics - Working Papers Series 1043, The University of Melbourne.
  8. Facundo Piguillem & Anderson L. Schneider, 2010. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," EIEF Working Papers Series 1002, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2009.
  9. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  10. John Creedy & Solmaz Moslehi, 2007. "Modelling the Composition of Government Expenditure in Democracies," Department of Economics - Working Papers Series 1007, The University of Melbourne.
  11. Daniel R. Carroll & Eric R. Young, 2009. "The Stationary Distribution of Wealth under Progressive Taxation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 469-478, July.
  12. Marina Azzimonti-Renzo & Eva de Francisco & Per Krusell, 2006. "The political economy of labor subsidies," Working Paper 06-09, Federal Reserve Bank of Richmond.
  13. Grey Gordon, 2011. "Computing Dynamic Heterogeneous-Agent Economies: Tracking the Distribution," PIER Working Paper Archive 11-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

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