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Inequality, Bipolarization, and Tax Progressivity

Author

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  • Oriol Carbonell-Nicolau
  • Humberto Llavador

Abstract

The steady rise in income and wealth inequality in the last four decades, together with the evolution of a vanishing middle class, has raised concerns about potentially pernicious effects of these trends on social stability and economic growth. This paper evaluates the possibility of designing tax systems aimed at reducing income inequality and bipolarization. Using two fundamentally different metrics, we provide a unified foundation of tax progressivity whereby, roughly, taxes are progressive if and only if they are inequality reducing; and taxes are inequality reducing if and only if they are bipolarization reducing.

Suggested Citation

  • Oriol Carbonell-Nicolau & Humberto Llavador, 2021. "Inequality, Bipolarization, and Tax Progressivity," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 492-513, November.
    • Handle: RePEc:aea:aejmic:v:13:y:2021:i:4:p:492-513
    DOI: 10.1257/mic.20190111
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    Cited by:

    1. Carbonell-Nicolau, Oriol, 2024. "Inequality and bipolarization-reducing mixed taxation," Mathematical Social Sciences, Elsevier, vol. 132(C), pages 128-145.
    2. Liu, Yulin & Li, Hebo & Wang, Cheng, 2025. "Digital financial inclusion and middle-income group vulnerability alleviation: Evidence from China," China Economic Review, Elsevier, vol. 89(C).
    3. Carbonell-Nicolau, Oriol, 2025. "On progressive tax systems with heterogeneous preferences," Journal of Mathematical Economics, Elsevier, vol. 117(C).
    4. Satya R. Chakravarty & Palash Sarkar, 2022. "Inequality minimising subsidy and taxation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 53-67, May.
    5. Chakravarty, Satya R. & Sarkar, Palash, 2022. "A synthesis of local and effective tax progressivity measurement," MPRA Paper 115180, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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