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Redistributive Taxation With Endogenous Sentiments

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Joan Esteban () (Institut d'Analisi Economica, CSIC, and Universitat Pompeu Fabra)
Laurence Kranich () (University at Albany, SUNY)

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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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Paper provided by Instituto de Estudios Fiscales in its series Working Papers with number 33-02 Classification-JEL : : D63, D64..

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Handle: RePEc:hpe:wpaper:y:2002:i:33

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March. [Downloadable!] (restricted)
  2. Piketty, Thomas, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 551-84, August. [Downloadable!] (restricted)
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  3. Nalbantian, Haig R & Schotter, Andrew, 1997. "Productivity under Group Incentives: An Experimental Study," American Economic Review, American Economic Association, vol. 87(3), pages 314-41, June. [Downloadable!] (restricted)
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  4. Alberto Alesina & Edward Glaeser & Bruce Sacerdote, 2001. "Why Doesn't the United States Have a European-Style Welfare State?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-2), pages 187-278. [Downloadable!]
  5. Laurence Kranich & Joan Esteban, . "A Theory of Endogenous Sentiments," Discussion Papers 02-11, State University of New York at Albany, Department of Economics.
  6. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 801-17, August. [Downloadable!] (restricted)
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  1. Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2006. "Redistributive Taxation Under Ethical Behaviour," Cahiers de recherche 0604, CIRPEE. [Downloadable!]
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  2. Bénabou, Roland & Tirole, Jean, 2005. "Belief in a Just World and Redistributive Politics," CEPR Discussion Papers 4952, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Gabrieli, Tommaso, 2007. "Beliefs and Redistributive Politics under Incomplete Information," The Warwick Economics Research Paper Series (TWERPS) 821, University of Warwick, Department of Economics. [Downloadable!]
  4. Javier Capó Parrilla & Francisco Gómez García, . "Nuevas Estimaciones Del Pleno Empleo De Las Regiones Españolas," Working Papers 18-05 Classification-JEL , Instituto de Estudios Fiscales. [Downloadable!]
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