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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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-06-02.

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Date of creation: 2006
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Handle: RePEc:fip:fedhwp:wp-06-02

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Keywords: Taxation ; Wealth;

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  1. Bassetto, Marco, 2005. "Equilibrium and government commitment," Journal of Economic Theory, Elsevier, vol. 124(1), pages 79-105, September.
  2. Rothstein, Paul, 1991. " Representative Voter Theorems," Public Choice, Springer, vol. 72(2-3), pages 193-212, December.
  3. Benhabib, Jess & Rustichini, Aldo, 1997. "Optimal Taxes without Commitment," Journal of Economic Theory, Elsevier, vol. 77(2), pages 231-259, December.
  4. Pollak, Robert A, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Wiley Blackwell, vol. 38(116), pages 401-14, October.
  5. William Jack & Roger Lagunoff, 2003. "Dynamic Enfranchisement," Wallis Working Papers WP36, University of Rochester - Wallis Institute of Political Economy.
  6. Andrew Atkeson & V.V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
  7. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  8. V. V. Chari & Patrick J. Kehoe, 1998. "Optimal fiscal and monetary policy," Staff Report 251, Federal Reserve Bank of Minneapolis.
  9. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  11. Adam Przeworski & Jess Benhabib, 2004. "The Political Economy of Redistribution under Democracy," 2004 Meeting Papers 58, Society for Economic Dynamics.
  12. Chamley, Christophe, 1985. "Efficient Taxation in a Stylized Model of Intertemporal General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 451-68, June.
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Cited by:
  1. Bishnu, Monisankar & Wang, Min, 2013. "Voting under temptation," Staff General Research Papers 36386, Iowa State University, Department of Economics.
  2. Facundo Piguillem & Anderson L. Schneider, 2010. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," EIEF Working Papers Series 1002, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2009.
  3. Alessandro Riboni & Facundo Piguillem, 2011. "Dynamic Bargaining over Redistribution in Legislatures," 2011 Meeting Papers 1320, Society for Economic Dynamics.
  4. François Gourio, 2008. "Is there a majority to support a capital tax cut?," Boston University - Department of Economics - Working Papers Series wp2008-001, Boston University - Department of Economics.
  5. Marina Azzimonti-Renzo & Eva de Francisco & Per Krusell, 2006. "The political economy of labor subsidies," Working Paper 06-09, Federal Reserve Bank of Richmond.
  6. Jean Guillaume Forand & John Duggan, 2013. "Markovian Elections," Working Papers 1305, University of Waterloo, Department of Economics, revised Oct 2013.
  7. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
  8. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
  9. Kirill Borissov & Alexander Surkov, 2010. "Endogenous growth in a model with heterogeneous agents and voting on public goods," EUSP Deparment of Economics Working Paper Series Ec-01/10, European University at St. Petersburg, Department of Economics, revised 29 Sep 2010.
  10. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.

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