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Representative democracy and marginal rate progressive income taxation

  • Carbonell-Nicolau, Oriol
  • Klor, Esteban F.

This paper develops a political economy model that is consistent with the fact that democracies have a preference for increasing marginal tax rates on income. We present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules. This set contains virtually any increasing and piecewise linear continuous function. Each party decides whether or not to present a candidate for election. There is a fixed cost of running. The elected candidate implements one of her preferred tax policies. Our main results provide conditions under which a Strong Nash Equilibrium exists, and a tax schedule with increasing marginal tax rates is implemented in some Nash Equilibria and in any Strong Nash Equilibrium.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 87 (2003)
Issue (Month): 9-10 (September)
Pages: 2339-2366

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Handle: RePEc:eee:pubeco:v:87:y:2003:i:9-10:p:2339-2366
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. 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 914-27, October.
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  8. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
  9. John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
  10. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
  11. Le Breton, Michel & Moyes, Patrick & Trannoy, Alain, 1996. "Inequality Reducing Properties of Composite Taxation," Journal of Economic Theory, Elsevier, vol. 69(1), pages 71-103, April.
  12. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  13. Hamada, Koichi, 1973. "A simple majority rule on the distribution of income," Journal of Economic Theory, Elsevier, vol. 6(3), pages 243-264, June.
  14. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
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  17. Thurow, Lester C, 1971. "The Income Distribution as a Pure Public Good," The Quarterly Journal of Economics, MIT Press, vol. 85(2), pages 327-36, May.
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