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Eating the Rich vs. Feeding the Poor: Borrowing Constraints and the Reluctance to Redistribute

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  • Harms, Philipp
  • Zink, Stefan

Abstract

This paper offers an explanation why most democracies are characterized by moderate taxation of wealth although the wealth distribution is persistently skewed to the right. We model an economy in which agents have to acquire higher education to qualify for skilled work and in which capital market imperfections prevent poor individuals from making such a profitable human capital investment. If these borrowing constraints do not bind for members of the middle class, they may rationally reject redistribution although both the current and the future median of the wealth distribution are below the mean. Copyright 2003 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 116 (2003)
Issue (Month): 3-4 (September)
Pages: 351-66

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Handle: RePEc:kap:pubcho:v:116:y:2003:i:3-4:p:351-66

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Web page: http://www.springerlink.com/link.asp?id=100332

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  1. Roland Bénabou & Efe A. Ok, 2001. "Social Mobility And The Demand For Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 447-487, May.
  2. Ann L. Owen & David N. Weil, 1997. "Intergenerational Earnings Mobility, Inequality, and Growth," NBER Working Papers 6070, National Bureau of Economic Research, Inc.
  3. Bénabou, Roland, 1996. "Inequality and Growth," CEPR Discussion Papers 1450, C.E.P.R. Discussion Papers.
  4. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  6. Piketty, Thomas & Banerjee, Abhijit & Aghion, Philippe, 1999. "Dualism and Macroeconomic Volatility," Scholarly Articles 4554124, Harvard University Department of Economics.
  7. Hindriks, Jean, 2001. "Is there a demand for income tax progressivity?," Economics Letters, Elsevier, vol. 73(1), pages 43-50, October.
  8. Breyer, Friedrich & Ursprung, Heinrich W, 1998. " Are the Rich Too Rich to be Expropriated?: Economic Power and the Feasibility of Constitutional Limits to Redistribution," Public Choice, Springer, vol. 94(1-2), pages 135-56, January.
  9. Kiminori Matsuyama, 1998. "Endogenous Inequality," Discussion Papers 1238, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Sebastian Galiani, 2010. "Social Mobility: What is it and why does it matter?," CEDLAS, Working Papers 0101, CEDLAS, Universidad Nacional de La Plata.
  2. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.
  3. Loukas Balafoutas, 2009. "How much income redistribution? An explanation based on vote-buying and corruption," Working Papers 2009-29, Faculty of Economics and Statistics, University of Innsbruck.

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