Redistributive Taxation with Endogenous Sentiments
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 agents' sentiments toward her. We focus on stationary patterns of utility interdependence. To demonstrate the effects of such endogeneity, we consider an example of 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. The main conclusion is that the tax structure, in that it affects behavior which in turn affects sentiments, plays a crucial role in determining which type of equilibrium occurs and its characteristics as well as the extent of altruism and social cohesion in society.
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 666156000000000007.
Date of creation: 06 May 2003
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Other versions of this item:
- Laurence Kranich & Joan Esteban, 2002. "Redistributive Taxation with Endogenous Sentiments," Discussion Papers 02-12, University at Albany, SUNY, Department of Economics.
- Joan M. Esteban & Laurence Kranich, 2002. "Redistributive Taxation with Endogenous Sentiments," UFAE and IAE Working Papers 529.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Joan Esteban & Laurence Kranich, . "Redistributive Taxation With Endogenous Sentiments," Working Papers 33-02 Classification-JEL , Instituto de Estudios Fiscales.
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-07 (All new papers)
- NEP-CDM-2003-05-15 (Collective Decision-Making)
- NEP-MAC-2003-05-15 (Macroeconomics)
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