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Eating the Rich vs. Feeding the Poor: Borrowing Constraints and the Reluctance to Redistribute

  • Harms, Philipp
  • Zink, Stefan

This paper offers an explanation why most democracies are characterized by moderate taxation of wealth although the wealth distribution is persistently skewed to the right. We model an economy in which agents have to acquire higher education to qualify for skilled work and in which capital market imperfections prevent poor individuals from making such a profitable human capital investment. If these borrowing constraints do not bind for members of the middle class, they may rationally reject redistribution although both the current and the future median of the wealth distribution are below the mean. Copyright 2003 by Kluwer Academic Publishers

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Article provided by Springer in its journal Public Choice.

Volume (Year): 116 (2003)
Issue (Month): 3-4 (September)
Pages: 351-66

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Handle: RePEc:kap:pubcho:v:116:y:2003:i:3-4:p:351-66
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  1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-98, April.
  2. Piketty, Thomas & Banerjee, Abhijit & Aghion, Philippe, 1999. "Dualism and Macroeconomic Volatility," Scholarly Articles 4554124, Harvard University Department of Economics.
  3. Bénabou, Roland & Ok, Efe, 1997. "Social Mobility and the Demand for Redistribution : the POUM Hypothesis," IDEI Working Papers 78, Institut d'Économie Industrielle (IDEI), Toulouse, revised 1999.
  4. Matsuyama, Kiminori, 2000. "Endogenous Inequality," Review of Economic Studies, Wiley Blackwell, vol. 67(4), pages 743-59, October.
  5. Ann L. Owen & David N. Weil, 1997. "Intergenerational Earnings Mobility, Inequality, and Growth," NBER Working Papers 6070, National Bureau of Economic Research, Inc.
  6. Hindriks, Jean, 2001. "Is there a demand for income tax progressivity?," Economics Letters, Elsevier, vol. 73(1), pages 43-50, October.
  7. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
  8. Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
  9. Breyer, Friedrich & Ursprung, Heinrich W, 1998. " Are the Rich Too Rich to be Expropriated?: Economic Power and the Feasibility of Constitutional Limits to Redistribution," Public Choice, Springer, vol. 94(1-2), pages 135-56, January.
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