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Redistribution, Taxes, and the Median Voter

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  • Marco Bassetto

    ()
    (Research Department Federal Reserve Bank of Chicago)

  • Jess Benhabib

Abstract

We study a simple model of production, accumulation, and redistribution, where agents are heterogeneous in their initial wealth, and a sequence of redistributive tax rates is voted upon. Though the policy is infinite-dimensional, we prove that a median voter theorem holds if households have identical, Gorman aggregable preferences; furthermore, the tax policy preferred by the median voter has the "bang-bang" property

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Paper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 78.

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Date of creation: 03 Dec 2006
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Handle: RePEc:red:sed006:78

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Keywords: Median voter; gorman aggregation; capital income taxes;

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  1. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  2. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. V. V. Chari & Patrick J. Kehoe, 1999. "Optimal Fiscal and Monetary Policy," NBER Working Papers 6891, National Bureau of Economic Research, Inc.
  4. Jess Benhabib & Adam Przeworski, 2006. "The political economy of redistribution under democracy," Economic Theory, Springer, vol. 29(2), pages 271-290, October.
  5. Roger Lagunoff & William Jack, 2004. "Dynamic Enfranchisement," Econometric Society 2004 North American Summer Meetings 24, Econometric Society.
  6. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-22, May.
  7. Pollak, Robert A, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Wiley Blackwell, vol. 38(116), pages 401-14, October.
  8. Marco Bassetto, 2002. "Equilibrium and government commitment," Working Papers 624, Federal Reserve Bank of Minneapolis.
  9. Rothstein, Paul, 1991. " Representative Voter Theorems," Public Choice, Springer, vol. 72(2-3), pages 193-212, December.
  10. Benhabib, Jess & Rustichini, Aldo, 1997. "Optimal Taxes without Commitment," Journal of Economic Theory, Elsevier, vol. 77(2), pages 231-259, December.
  11. Chamley, Christophe, 1985. "Efficient Taxation in a Stylized Model of Intertemporal General Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 451-68, June.
  12. Andrew Atkeson & V.V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
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Cited by:
  1. Facundo Piguillem & Alessandro Riboni, 2012. "Dynamic Bargaining over Redistribution in Legislatures," EIEF Working Papers Series 1206, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2012.
  2. Bishnu, Monisankar & Wang, Min, 2013. "Voting under temptation," Staff General Research Papers 36386, Iowa State University, Department of Economics.
  3. Facundo Piguillem & Anderson L. Schneider, 2010. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," EIEF Working Papers Series 1002, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2009.
  4. Ruediger Bachmann & Jinhui Bai, 2012. "Online Appendix to "Politico-Economic Inequality and the Comovement of Government Purchases"," Technical Appendices 11-243, Review of Economic Dynamics.
  5. Marina Azzimonti & Eva de Francisco & Per Krusell, 2006. "The political economy of labor subsidies," 2006 Meeting Papers 588, Society for Economic Dynamics.
  6. Jean Guillaume Forand & John Duggan, 2013. "Markovian Elections," Working Papers 1305, University of Waterloo, Department of Economics, revised Oct 2013.
  7. Borissov, Kirill & Surkov, Alexander, 2010. "Endogenous growth in a model with heterogeneous agents and voting on public goods," MPRA Paper 27517, University Library of Munich, Germany.
  8. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
  9. François Gourio, 2008. "Is there a majority to support a capital tax cut?," Boston University - Department of Economics - Working Papers Series wp2008-001, Boston University - Department of Economics.
  10. Ruediger Bachmann & Jinhui Bai, 2010. "Government Purchases Over the Business Cycle: the Role of Economic and Political Inequality," NBER Working Papers 16247, National Bureau of Economic Research, Inc.

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