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Capital Taxation and Electoral Accountability

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  • Aidt, T.
  • Magris, F.

Abstract

In a representative democracy, voters can use elections to protect their property by holding politicians accountable for the tax policies they implement while in office. This paper demonstrates that performance voting can - partly or wholly - solve the capital levy problem. We characterise the ‘best’ non-expropriating tax policies that can be sustained in a stationary Markov Perfect Equilibrium; show when this coincides with the second best tax policy; and discuss, in detail, the robustness of the result.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0318.

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Length: 30
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:cam:camdae:0318

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Web page: http://www.econ.cam.ac.uk/index.htm

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Keywords: performance voting; capital taxation; time consistency;

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  1. Persson, Torsten & Tabellini, Guido, 1994. "Representative democracy and capital taxation," Journal of Public Economics, Elsevier, vol. 55(1), pages 53-70, September.
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Citations

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Cited by:
  1. Dalibor S. Eterovic, 2011. "Institutional Bias towards the Status Quo," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(3), pages 489-514, September.
  2. Aidt, T. & Magris, F., 2003. "Capital Taxation and Electoral Accountability," Cambridge Working Papers in Economics 0318, Faculty of Economics, University of Cambridge.
  3. Aidt, T.S. & Dutta, J., 2004. "Strategic Consensus," Cambridge Working Papers in Economics 0403, Faculty of Economics, University of Cambridge.
  4. Toke A. Aidt & Facundo Albornoz, 2007. "An Economic Theory of Political Institutions: Foreign Intervention and Overseas Investments," Discussion Papers 07-03, Department of Economics, University of Birmingham.
  5. Toke Aidt & Jayasri Dutta, 2010. "Fiscal Federalism and Electoral Accountability," CESifo Working Paper Series 3022, CESifo Group Munich.
  6. Aidt, T.S. & Dutta, J., 2008. "Electoral Uncertainty and Public Goods," Cambridge Working Papers in Economics 0843, Faculty of Economics, University of Cambridge.
  7. Dalibor Eterovic, 2009. "Policy Reform Under Electoral Uncertainty," Working Papers Central Bank of Chile 546, Central Bank of Chile.
  8. Eric Borgne & Ben Lockwood, 2006. "Do Elections Always Motivate Incumbents? Learning vs. Re-Election Concerns," Public Choice, Springer, vol. 129(1), pages 41-60, October.
  9. Aidt, Toke S. & Dutta, Jayasri, 2007. "Policy myopia and economic growth," European Journal of Political Economy, Elsevier, vol. 23(3), pages 734-753, September.

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