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Political Activism and the Provision of Dynamic Incentives: Growing the Pie in the Battle for Redistribution

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  • Antoine Camous
  • Russell Cooper

Abstract

This paper studies the determination of income taxes in a dynamic setting with human capital accumulation. The goal is to understand the factors that support an outcome without complete redistribution, given a majority of relatively poor agents and the inability to commit to future taxes. All agents agree ex ante that limiting tax and transfers is beneficial but a majority favours large redistribution, ex post, at the time of the vote. In a political influence game, group activism limits the support for expropriatory taxation and preserves incentives. In some cases, the outcome corresponds to the optimal allocation under commitment.

Suggested Citation

  • Antoine Camous & Russell Cooper, 2021. "Political Activism and the Provision of Dynamic Incentives: Growing the Pie in the Battle for Redistribution," The Economic Journal, Royal Economic Society, vol. 131(639), pages 2824-2855.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:639:p:2824-2855.
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    File URL: http://hdl.handle.net/10.1093/ej/ueab015
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