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The Social Contracts with Endogenous Sentiments

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  • Joan Esteban
  • Laurence Kranich

Abstract

We present a model in which an individual's sentiments toward others are determined endogenously on the basis of how they perform relative to the societal average. This, in turn, affects the individual's own behavior and hence other agent's sentiments toward her. We focus on stationary patterns of utility interdependence in a production economy with redistributive taxation. There are two types of stationary equilibria: one in which all agents conform to the societal norm, and a second involving social stratification on the basis of productivity into two or three groups. We show that both types of social contract can be sustained as a political equilibrium. In the cohesive equilibrium with high redistribution, sentiments will be such that a majority of individuals will support high taxation, while in the clustered society with low redistribution the majority of voters will be in favor of keeping taxes low.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 71.

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Date of creation: Jun 2003
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Handle: RePEc:bge:wpaper:71

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Keywords: Endogenous altruism; income taxation; social contract;

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Cited by:
  1. Mouhoud, El Mouhoub & Miotti, Luis & Oudinet, Joël, 2009. "Migration and Determinants of Remittances to Southern Mediterranean Countries: when history matters! Insights of two new surveys," Economics Papers from University Paris Dauphine 123456789/2574, Paris Dauphine University.
  2. Marko Tervio & Ernesto Dal Bo, 2008. "Self-esteem, Moral Capital, and Wrongdoing," 2008 Meeting Papers 245, Society for Economic Dynamics.
  3. Miquel Pellicer & Vimal Ranchhod & Mare Sarr & Eva Wegner, 2011. "Inequality Traps in South Africa: An overview and research agenda," SALDRU Working Papers 57, Southern Africa Labour and Development Research Unit, University of Cape Town.
  4. Bénabou, Roland, 2008. "Ideology," CEPR Discussion Papers 6754, C.E.P.R. Discussion Papers.
  5. R. I. Luttens & M.A. Valfort, 2008. "Voting for redistribution under desert-sensitive altruism," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/531, Ghent University, Faculty of Economics and Business Administration.

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