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Inequality, Mobility and Redistributive Taxation in a Finance-constrained Economy

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  • Ryo Arawatari

    () (Faculty of Economics, Shinshu University)

  • Tetsuo Ono

    () (Graduate School of Economics, Osaka University)

Abstract

This paper presents a simple model that displays a joint determination of income inequality and intergenerational mobility affected by redistributive taxation. The model shows that a larger redistribution improves equality and utility and enhances mobility when the poor are financially constrained, however it creates a trade-off between the rich and the poor in terms of utility when the poor are financially unconstrained. The model also shows that the size of the redistribution as well as wage inequality play key roles in explaining the cross-country differences in inequality and mobility among OECD countries.

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Bibliographic 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 09-28.

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Length: 34 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:osk:wpaper:0928

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: inequality; Gini coefficient; intergenerational mobility; redistributive taxation; financial constraints.;

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