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Redistribution, Taxes and the Median Voter

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  • Marco Bassetto

    (University of Minnesota)

  • Jess Benhabib

    (New York University)

Abstract

We study a simple model of production, accumulation, and redistribution, where agents are heterogeneous in their initial wealth, and a sequence of redistributive tax rates is voted upon. Though the policy is infinite-dimensional, we prove that a median voter theorem holds if households have identical, Gorman aggregable preferences; furthermore, the tax policy preferred by the median voter has the "bang-bang" property. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 9 (2006)
Issue (Month): 2 (April)
Pages: 211-223

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Handle: RePEc:red:issued:v:9:y:2006:i:2:p:211-223

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Related research

Keywords: Redistribution; Median voter; Capital income taxes; Gorman aggregation;

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References

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  1. V. V. Chari & Patrick J. Kehoe, 1999. "Optimal Fiscal and Monetary Policy," NBER Working Papers 6891, National Bureau of Economic Research, Inc.
  2. Chamley, Christophe, 1985. "Efficient Taxation in a Stylized Model of Intertemporal General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 451-68, June.
  3. Jack, William & Lagunoff, Roger, 2006. "Dynamic enfranchisement," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 551-572, May.
  4. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  5. Marco Bassetto, 2002. "Equilibrium and government commitment," Working Papers 624, Federal Reserve Bank of Minneapolis.
  6. Rothstein, Paul, 1991. " Representative Voter Theorems," Public Choice, Springer, vol. 72(2-3), pages 193-212, December.
  7. Jess Benhabib & Adam Przeworski, 2006. "The political economy of redistribution under democracy," Economic Theory, Springer, vol. 29(2), pages 271-290, October.
  8. Andrew Atkeson & V.V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
  9. Pollak, Robert A, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Wiley Blackwell, vol. 38(116), pages 401-14, October.
  10. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  12. Benhabib, Jess & Rustichini, Aldo, 1997. "Optimal Taxes without Commitment," Journal of Economic Theory, Elsevier, vol. 77(2), pages 231-259, December.
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Citations

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Cited by:
  1. Gourio, Fran├žois, 2009. "Is there a majority to support a capital tax cut?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1278-1295, June.
  2. Kirill Borissov & Alexander Surkov, 2010. "Endogenous growth in a model with heterogeneous agents and voting on public goods," EUSP Deparment of Economics Working Paper Series Ec-01/10, European University at St. Petersburg, Department of Economics, revised 29 Sep 2010.
  3. Bishnu, Monisankar & Wang, Min, 2013. "Voting under temptation," Economics Letters, Elsevier, vol. 118(3), pages 419-423.
  4. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
  5. Marina Azzimonti-Renzo & Eva de Francisco & Per Krusell, 2006. "The political economy of labor subsidies," Working Paper 06-09, Federal Reserve Bank of Richmond.
  6. Facundo Piguillem & Anderson Schneider, 2013. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 332-349, April.
  7. Alessandro Riboni & Facundo Piguillem, 2011. "Dynamic Bargaining over Redistribution in Legislatures," 2011 Meeting Papers 1320, Society for Economic Dynamics.
  8. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.
  9. Jean Guillaume Forand & John Duggan, 2013. "Markovian Elections," Working Papers 1305, University of Waterloo, Department of Economics, revised Oct 2013.

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