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Redistribution, taxes, and the median voter

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  • Marco Bassetto
  • Jess Benhabib

Abstract

We study a simple model of production, accumulation, and redistribution, where agents are heterogeneous in their initial wealth, and a sequence of redistributive tax rates is voted upon. Though the policy is infinite-dimensional, we prove that a median voter theorem holds if households have identical, Gorman aggregable preferences; furthermore, the tax policy preferred by the median voter has the ?bang- bang? property.

Suggested Citation

  • Marco Bassetto & Jess Benhabib, 2006. "Redistribution, taxes, and the median voter," Working Paper Series WP-06-02, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-06-02
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    References listed on IDEAS

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    1. Chari, V.V. & Kehoe, Patrick J., 1999. "Optimal fiscal and monetary policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 26, pages 1671-1745, Elsevier.
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    5. Rothstein, Paul, 1991. "Representative Voter Theorems," Public Choice, Springer, vol. 72(2-3), pages 193-212, December.
    6. Bassetto, Marco, 2005. "Equilibrium and government commitment," Journal of Economic Theory, Elsevier, vol. 124(1), pages 79-105, September.
    7. Jess Benhabib & Adam Przeworski, 2006. "The political economy of redistribution under democracy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(2), pages 271-290, October.
    8. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
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    More about this item

    Keywords

    Taxation; Wealth;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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