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|
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- Philippe De Donder & John E. Roemer, 0.
"The dynamics of capital accumulation in the US: simulations after piketty,"
The Journal of Economic Inequality,
Springer;Society for the Study of Economic Inequality, vol. 0, pages 1-21.
- Philippe De Donder & John E. Roemer, 2015. "The Dynamics of Capital Accumulation in the US: Simulations after Piketty," CESifo Working Paper Series 5329, CESifo Group Munich.
- De Donder, Philippe & Roemer, John, 2015. "The dynamics of capital accumulation in the US: Simulations after Piketty," TSE Working Papers 15-568, Toulouse School of Economics (TSE).
- Philippe De Donder & John E. Roemer, 2015. "The Dynamics of Capital Accumulation in the US: Simulations after Piketty," Cowles Foundation Discussion Papers 1998, Cowles Foundation for Research in Economics, Yale University.
- Philippe De Donder & John E. Roemer, 2016. "The Dynamics of Capital Accumulation in the US: Simulations after Piketty," Cowles Foundation Discussion Papers 1998R, Cowles Foundation for Research in Economics, Yale University.
- 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. Full references (including those not matched with items on IDEAS)
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