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Social Ideology and Taxes in a Differentiated Candidates Framework

  • Stefan Krasa
  • Mattias Polborn

How does ideological polarization on non-economic matters influence the size of government? We analyze this question using a differentiated candidates framework: Two office-motivated candidates differ in their (fixed) ideological position and their production function for public goods, and choose which tax rate to propose. We provide conditions under which a unique equilibrium exists. In equilibrium, candidates propose different tax rates, and the extent of economic differentiation is influenced by the distribution and intensity of non-economic preferences in the electorate. In turn, the extent of economic differentiation influences whether parties divide the electorate primarily along economic or social lines.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3503.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3503
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  1. Stefan Krasa & Mattias Polborn, 2009. "Political Competition between Differentiated Candidates," CESifo Working Paper Series 2560, CESifo Group Munich.
  2. Fernández, Raquel & Levy, Gilat, 2008. "Diversity and redistribution," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 925-943, June.
  3. Martin J. Osborne & Al Slivinksi, 1995. "A Model of Political Competition with Citizen-Candidates," Department of Economics Working Papers 1995-01, McMaster University.
  4. Lindqvist, Erik & Östling, Robert, 2006. "Political Polarization and the Size of Government," SSE/EFI Working Paper Series in Economics and Finance 628, Stockholm School of Economics, revised 02 Jul 2007.
  5. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May.
  6. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  7. Tim Besley & Stephen Coate, . ""An Economic Model of Representative Democracy''," CARESS Working Papres 95-02, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
  8. Stefan Krasa & Mattias Polborn, 2010. "Competition between Specialized Candidates," CESifo Working Paper Series 2930, CESifo Group Munich.
  9. Roemer, John E., 1998. "Why the poor do not expropriate the rich: an old argument in new garb," Journal of Public Economics, Elsevier, vol. 70(3), pages 399-424, December.
  10. Austen-Smith, David & Wallerstein, Michael, 2006. "Redistribution and affirmative action," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1789-1823, November.
  11. 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.
  12. Lee, Woojin & Roemer, John E., 2006. "Racism and redistribution in the United States: A solution to the problem of American exceptionalism," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1027-1052, August.
  13. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  14. Alessandro Lizzeri & Nicola Persico, 2004. "Why Did the Elites Extend the Suffrage? Democracy and the Scope of Government, With an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 705-763, May.
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