An Allegory of the Political Influence of the Top 1%
We study how rich shareholders can use their economic power to deregulate firms that they own, thus skewing the income distribution towards themselves. Agents differ in productivity and choose how much labor to supply. High productivity agents also own shares in the productive sector and thus earn capital income. All vote over a linear tax rate on (labor and capital) income whose proceeds are redistributed lump sum. Capital owners also lobby in order to ease the price cap imposed on the private firm. We solve analytically for the Kantian equilibrium of this lobbying game together with the majority voting equilibrium over the tax rate, and we perform simulations. We obtain numerically that, as the capital income distribution becomes more concentrated among the top productivity individuals, their increased lobbying effort generates efficiency as well as equity costs, with lower labor supply and lower average utility levels in society.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013.
"The Top 1 Percent in International and Historical Perspective,"
NBER Working Papers
19075, National Bureau of Economic Research, Inc.
- Facundo Alvaredo & Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2013. "The Top 1 Percent in International and Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 3-20, Summer.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4478. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.