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Redistributive Politics with Distortionary Taxation

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  • Crutzen, Benoît SY
  • Sahuguet, Nicolas

Abstract

We extend the discussion of redistributive politics across electoral systems to allow for taxation to be distortionary. We allow politicians to choose any tax rate between zero and unity and then redistribute the money collected. We build on the model put forward by Myerson (1993) and Lizzeri and Persico (2001 and 2005) to show that the use of distortionnary taxation can be understood as an analysis of the trade-off between efficiency and targetability. We derive the equilibrium taxes and redistribution schemes with distortions. We show that the presence of distortions makes full taxation unattractive. We also derive the size of the government, the deadweight loss and inequality as a function of distortions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5975.

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Date of creation: Dec 2006
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Handle: RePEc:cpr:ceprdp:5975

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Keywords: distortionary taxation; redistributive politics;

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References

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  1. Persson, T. & Tabellini, G., 1998. "The Size and Scope of Government: Comparative Politics with Rational Politicians," Papers 658, Stockholm - International Economic Studies.
  2. Philip J. Grossman, 1987. "The Optimal Size of Government," Monash Economics Working Papers archive-06, Monash University, Department of Economics.
  3. Lizzeri, Alessandro, 1999. "Budget Deficits and Redistributive Politics," Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 909-28, October.
  4. Torsten Persson & Gerard Roland & Guido Tabellini, . "Comparative Politics and Public Finance," Working Papers 114, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Jackson, Matthew O. & Dekel, Eddie & Wolinsky, Asher, 2005. "Vote buying," Working Papers 1215, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2005. "Vote Buying," Others 0503006, EconWPA.
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  6. Kovenock, Dan & Robertson, Brian, 2005. "Electoral Poaching and Party Identification," Purdue University Economics Working Papers 1178, Purdue University, Department of Economics.
  7. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  8. Gouveia, Miguel & Oliver, David, 1996. "Voting over flat taxes in an endowment economy," Economics Letters, Elsevier, vol. 50(2), pages 251-258, February.
  9. Eddie Dekel & Matthew O. Jackson & Asher Wolinksy, 2006. "Vote Buying II: Legislatures and Lobbying," Discussion Papers 1433, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Nicolas Sahuguet & Nicola Persico, 2006. "Campaign spending regulation in a model of redistributive politics," Economic Theory, Springer, vol. 28(1), pages 95-124, 05.
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  12. Laslier, Jean-Francois & Picard, Nathalie, 2002. "Distributive Politics and Electoral Competition," Journal of Economic Theory, Elsevier, vol. 103(1), pages 106-130, March.
  13. John Douglas Wilson, 1990. "Are Efficiency Improvements In Government Transfer Policies Self-Defeating In Political Equilibrium?," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 241-258, November.
  14. Brian Roberson, 2006. "The Colonel Blotto game," Economic Theory, Springer, vol. 29(1), pages 1-24, September.
  15. Philip Grossman, 1987. "The optimal size of government," Public Choice, Springer, vol. 53(2), pages 131-147, January.
  16. Alessandro Lizzeri & Nicola Persico, 2005. "A Drawback Of Electoral Competition," Journal of the European Economic Association, MIT Press, vol. 3(6), pages 1318-1348, December.
  17. Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2008. "Vote Buying: General Elections," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 351-380, 04.
  18. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
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Citations

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Cited by:
  1. Castanheira, Micael & Nicodème, Gaëtan & Profeta, Paola, 2011. "On the political economics of tax reforms," CEPR Discussion Papers 8507, C.E.P.R. Discussion Papers.
  2. Felix J. Bierbrauer & Pierre C. Boyer, 2010. "Political Competition and Mirrleesian Income Taxation: A First Pass," CESifo Working Paper Series 3294, CESifo Group Munich.
  3. Subhasish M. Chowdhury & Dan Kovenock J. & Roman M. Sheremeta, 2009. "An Experimental Investigation of Colonel Blotto Games," CESifo Working Paper Series 2688, CESifo Group Munich.
  4. Micael Castanheira & Gaëtan Nicodème & Paola Profeta, 2012. "On the Political Economics of Tax Reforms: survey and empirical assessment," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2012-08-ccr, Condorcet Center for political Economy.
  5. Kovenock, Dan & Roberson, Brian, 2009. "Non-partisan 'Get-out-the-vote' efforts and policy outcomes," Discussion Papers, Research Unit: Market Processes and Governance SP II 2009-07, Social Science Research Center Berlin (WZB).

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