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Capital Taxation and Electoral Accountability

  • Aidt, T.
  • Magris, F.

In a representative democracy, voters can use elections to protect their property by holding politicians accountable for the tax policies they implement while in office. This paper demonstrates that performance voting can - partly or wholly - solve the capital levy problem. We characterise the ‘best’ non-expropriating tax policies that can be sustained in a stationary Markov Perfect Equilibrium; show when this coincides with the second best tax policy; and discuss, in detail, the robustness of the result.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0318.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0318.

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Length: 30
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:cam:camdae:0318
Note: PE, ET
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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