This paper characterizes a stationary Markov perfect political equilibrium where agents vote over income taxation that distorts their educational investment. Agents become rich or poor through educational investment, and the poor have a second chance at success. The results show the following concerning the costs of a second chance. First, when the cost is low, the economy is characterized by high levels of upward mobility and inequality, and a low tax burden supported by the poor with prospects for upward mobility. Second, when the cost is high, there are multiple equilibria: one is characterized by high levels of upward mobility and inequality and a low tax burden supported by the rich, the other is characterized by low levels of upward mobility and inequality and a high tax burden supported by the poor. Numerical examples show that the low-cost economy is inferior to the high-cost economy in terms of social welfare.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Publisher Info
Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number
08-04.
Find related papers by JEL classification: D30 - Microeconomics - - Distribution - - - General D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
This paper has been announced in the following NEP Reports:
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.:
John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2001.
"The Survival of the Welfare State,"
Economics Working Papers
603, Department of Economics and Business, Universitat Pompeu Fabra.
[Downloadable!]
Other versions:
Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002.
"The Survival of the Welfare State,"
Seminar Papers
704, Stockholm University, Institute for International Economic Studies.
[Downloadable!]
John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Abrizio Zilibotti, 2003.
"The Survival of the Welfare State,"
American Economic Review,
American Economic Association, vol. 93(1), pages 87-112, March.
[Downloadable!]
Martin Gonzalez-Eiras & Dirk Niepelt, 2007.
"The Future of Social Security,"
Working Papers
07.02, Swiss National Bank, Study Center Gerzensee.
[Downloadable!]
Other versions:
John Hassler & Jose V. Rodriguez Mora & Joseph Zeira, 2007.
"Inequality and Mobility,"
ESE Discussion Papers
165, Edinburgh School of Economics, University of Edinburgh.
[Downloadable!]
Other versions:
Hassler, John & Rodríguez Mora, José Vicente & Zeira, Joseph, 2000.
"Inequality and Mobility,"
CEPR Discussion Papers
2497, C.E.P.R. Discussion Papers.
[Downloadable!] (restricted)
Hassler, John & Rodriguez Mora, Jose V. & Zeira, Joseph, 2002.
"Inequality and Mobility,"
Working Paper Series
rwp02-009, Harvard University, John F. Kennedy School of Government.
[Downloadable!]
Cited by: (explanations, 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.)