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

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Author Info
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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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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Related research
Keywords: inequality; Gini coefficient; intergenerational mobility; redistributive taxation; financial constraints.;

Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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  6. Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April. [Downloadable!] (restricted)
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  15. Iyigun, Murat F, 1999. "Public Education and Intergenerational Economic Mobility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 697-710, August.
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