IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v192y2020ics0165176520301518.html
   My bibliography  Save this article

Voting over redistribution in the Meltzer–Richard model under interdependent labor inputs

Author

Listed:
  • Lopez-Velasco, Armando R.

Abstract

This paper extends the median voter result of Meltzer and Richard (1981) to the case where a labor economy has any constant returns to scale production function under quasilinear preferences with constant wage elasticity. Average productivities of the different labor inputs depend on their relative abundance in the economy. Agents are heterogeneous due to their labor type and (given type) due to their relative efficiency. They vote over income tax rates which in turn dictate the level of redistribution. The paper shows that preferences over tax rates are single-peaked and hence the median voter theorem applies. This framework connects the scarcity of inputs to the most preferred tax rates.

Suggested Citation

  • Lopez-Velasco, Armando R., 2020. "Voting over redistribution in the Meltzer–Richard model under interdependent labor inputs," Economics Letters, Elsevier, vol. 192(C).
    • Handle: RePEc:eee:ecolet:v:192:y:2020:i:c:s0165176520301518
    DOI: 10.1016/j.econlet.2020.109206
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176520301518
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2020.109206?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Facundo Piguillem & Anderson Schneider, 2013. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 332-349, April.
    2. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 465-490.
    3. Timo Boppart & Per Krusell, 2020. "Labor Supply in the Past, Present, and Future: A Balanced-Growth Perspective," Journal of Political Economy, University of Chicago Press, vol. 128(1), pages 118-157.
    4. Raj Chetty, 2012. "Bounds on Elasticities With Optimization Frictions: A Synthesis of Micro and Macro Evidence on Labor Supply," Econometrica, Econometric Society, vol. 80(3), pages 969-1018, May.
    5. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, December.
    6. Meltzer, Allan H. & Richard, Scott F., 2015. "A positive theory of economic growth and the distribution of income," Research in Economics, Elsevier, vol. 69(3), pages 265-290.
    7. Jose-Victor Rios-Rull & Per Krusell, 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model," American Economic Review, American Economic Association, vol. 89(5), pages 1156-1181, December.
    8. Diamond, Peter A, 1998. "Optimal Income Taxation: An Example with a U-Shaped Pattern of Optimal Marginal Tax Rates," American Economic Review, American Economic Association, vol. 88(1), pages 83-95, March.
    9. Marina Azzimonti & Eva De Francisco & Per Krusell, 2006. "Median‐voter Equilibria in the Neoclassical Growth Model under Aggregation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(4), pages 587-606, December.
    10. Marco Bassetto & Jess Benhabib, 2006. "Redistribution, Taxes and the Median Voter," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 211-223, April.
    11. Corbae, Dean & D'Erasmo, Pablo & Kuruscu, Burhanettin, 2009. "Politico-economic consequences of rising wage inequality," Journal of Monetary Economics, Elsevier, vol. 56(1), pages 43-61, January.
    12. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    13. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
    14. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Facundo Piguillem & Anderson Schneider, 2013. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 332-349, April.
    2. Alessandro Riboni & Facundo Piguillem, 2011. "Dynamic Bargaining over Redistribution in Legislatures," 2011 Meeting Papers 1320, Society for Economic Dynamics.
    3. Azzimonti, Marina & de Francisco, Eva & Krusell, Per, 2008. "Production subsidies and redistribution," Journal of Economic Theory, Elsevier, vol. 142(1), pages 73-99, September.
    4. 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.
    5. Lorenzo Burlon, 2017. "Public expenditure distribution, voting, and growth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(4), pages 789-810, August.
    6. Daniel R. Carroll, 2013. "The demand for income tax progressivity in the growth model," Working Papers (Old Series) 1106, Federal Reserve Bank of Cleveland.
    7. Kirill Borissov & Alexander Surkov, 2010. "Endogenous Growth in a Model with Heterogeneous Agents and Voting on Public Goods," EUSP Department of Economics Working Paper Series 2010/01, European University at St. Petersburg, Department of Economics, revised 29 Sep 2010.
    8. Barnett, Richard & Bhattacharya, Joydeep & Bunzel, Helle, 2012. "Voting for immiserizing income redistribution in the Meltzer-Richard model," School of Economics Working Paper Series 2012-15, LeBow College of Business, Drexel University.
    9. Graziella Bertocchi, 2011. "The Vanishing Bequest Tax: The Comparative Evolution Of Bequest Taxation In Historical Perspective," Economics and Politics, Wiley Blackwell, vol. 23(1), pages 107-131, March.
    10. Richard C. Barnett & Joydeep Bhattacharya & Helle Bunzel, 2014. "Voting For Income-Immiserizing Redistribution In The Meltzer–Richard Model," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 682-695, April.
    11. Daniel Carroll & Jim Dolmas & Eric Young, 2021. "The Politics of Flat Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 174-201, January.
    12. Marina Azzimonti-Renzo & Eva De Francisco & Per Krusell, 2006. "The political economy of labor subsidies," Working Paper 06-09, Federal Reserve Bank of Richmond.
    13. 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.
    14. Janeba, Eckhard & Schulz, Karl, 2023. "Nonlinear taxation and international mobility in general equilibrium," Journal of Public Economics, Elsevier, vol. 218(C).
    15. Florian Scheuer & Alexander Wolitzky, 2016. "Capital Taxation under Political Constraints," American Economic Review, American Economic Association, vol. 106(8), pages 2304-2328, August.
    16. Jacobs, Bas & Jongen, Egbert L.W. & Zoutman, Floris T., 2017. "Revealed social preferences of Dutch political parties," Journal of Public Economics, Elsevier, vol. 156(C), pages 81-100.
    17. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
    18. Assaf Razin & Efraim Sadka, 2004. "Aging and the Welfare State: The Role of Young and Old Voting Pivots," NBER Working Papers 10967, National Bureau of Economic Research, Inc.
    19. Boppart, Timo & Krusell, Per & Mitman, Kurt, 2018. "Exploiting MIT shocks in heterogeneous-agent economies: the impulse response as a numerical derivative," Journal of Economic Dynamics and Control, Elsevier, vol. 89(C), pages 68-92.
    20. Ozan Hatipoglu & Gulenay Ozbek, 2011. "On the political economy of the informal sector and income redistribution," European Journal of Law and Economics, Springer, vol. 32(1), pages 69-87, August.

    More about this item

    Keywords

    Meltzer–Richard; Median voter; Interdependent labor; Redistribution;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:192:y:2020:i:c:s0165176520301518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.