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Tax Policy Design in The Presence of Social Preferences: Some Experimental Evidence

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Author Info
Lucy F. Ackert ()
Jorge Martinez-Vazquez () (International Studies Program. Andrew Young School of Policy Studies, Georgia State University)
Mark Rider () (Andrew Young School of Policy Studies, Georgia State University)

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Abstract

This paper reports the results of experiments designed to examine whether a taste for fairness affects people’s preferred tax structure. Building on the Fehr and Schmidt (1999) model we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing between alternative tax structures. However, concern for redistribution decreases when it leads to increasing deadweight losses. Our findings have important implications for the design of optimal tax theory.

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Publisher Info
Paper provided by International Studies Program, Andrew Young School of Policy Studies, Georgia State University in its series International Studies Program Working Paper Series, at AYSPS, GSU with number paper0425.

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Length: 34 pages
Date of creation: 01 Nov 2004
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Handle: RePEc:ays:ispwps:paper0425

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Related research
Keywords: tax policy; social preferences; fairness;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Hörisch, Hannah, 2007. "Is the veil of ignorance only a concept about risk? An experiment," Discussion Papers in Economics 1362, University of Munich, Department of Economics. [Downloadable!]
  2. Hannah Hörisch, 2008. "Is the veil of ignorance only a concept about risk? An experiment," Discussion Papers 230, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
  3. Jorge Martinez-Vazquez & Mark Rider & Lucy F. Ackert & Ann Gillette, 2005. "Experimental Evidence for Tax Policy Design," International Studies Program Working Paper Series, at AYSPS, GSU paper0517, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
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