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Redistributive Politics with Distortionary Taxation

  • Crutzen, Benoît SY
  • Sahuguet, Nicolas

We extend the discussion of redistributive politics across electoral systems to allow for taxation to be distortionary. We allow politicians to choose any tax rate between zero and unity and then redistribute the money collected. We build on the model put forward by Myerson (1993) and Lizzeri and Persico (2001 and 2005) to show that the use of distortionnary taxation can be understood as an analysis of the trade-off between efficiency and targetability. We derive the equilibrium taxes and redistribution schemes with distortions. We show that the presence of distortions makes full taxation unattractive. We also derive the size of the government, the deadweight loss and inequality as a function of distortions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5975.

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Date of creation: Dec 2006
Date of revision:
Handle: RePEc:cpr:ceprdp:5975
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  1. Jackson, Matthew O. & Dekel, Eddie & Wolinsky, Asher, 2005. "Vote buying," Working Papers 1215, California Institute of Technology, Division of the Humanities and Social Sciences.
    • Eddie Dekel & Matthew O. Jackson & Asher Wolinsky, 2004. "Vote Buying," Discussion Papers 1386, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  2. John Douglas Wilson, 1990. "Are Efficiency Improvements In Government Transfer Policies Self-Defeating In Political Equilibrium?," Economics and Politics, Wiley Blackwell, vol. 2(3), pages 241-258, November.
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  6. Torsten Persson & Guido Tabellini, 1998. "The Size and Scope of Government: Comparative Politics with Rational Politicians," NBER Working Papers 6848, National Bureau of Economic Research, Inc.
  7. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
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  9. Philip J. Grossman, 1987. "The Optimal Size of Government," Monash Economics Working Papers archive-06, Monash University, Department of Economics.
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  14. Eddie Dekel & Matthew O. Jackson & Asher Wolinksy, 2006. "Vote Buying II: Legislatures and Lobbying," Discussion Papers 1433, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  18. repec:oup:restud:v:66:y:1999:i:4:p:909-28 is not listed on IDEAS
  19. Becker, Gary S & Mulligan, Casey B, 2003. "Deadweight Costs and the Size of Government," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 293-340, October.
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