The Democratic Political Economy of Progressive Income Taxation
AbstractWhy do both left and right political parties almost always propose progressive income taxation schemes in political competition? Analysis of this problem has been hindered by the two-dimensionality of the issue space. To give parties a choice over a domain which contains both progressive and regressive policies requires an issue space that is at least two-dimensional. Nash equilibrium between two parties with (complete) preferences over two-dimensional policies fails to exist. The author introduces a new equilibrium concept for political games, based on inner-party struggle. A party consists of three factions, reformists, militants, and opportunists: each faction has a complete preference order on policy space, but together they can only agree on a partial order. Inner-party unity equilibrium is defined as Nash equilibrium between two parties, each of which maximizes with respect to its quasi-order. Such equilibria exist in the two-dimensional model and in them, both parties propose progressive income taxation.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 97-03.
Length: 33 pages
Date of creation: Apr 1997
Date of revision:
Publication status: Published in: Econometrica 67(1) 1999, 1-19
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progressive taxation; spatial model;
Other versions of this item:
- John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
- John E. Roemer, . "The Democratic Political Economy Of Progressive Income Taxation," Department of Economics 97-11, California Davis - Department of Economics.
- John Roemer, 2003. "The Democratic Political Economy Of Progressive Income Taxation," Working Papers 9711, University of California, Davis, Department of Economics.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
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