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The Dynamics of Exclusion and Fiscal Conservatism

  • Saint-Paul, Gilles

This paper studies the impact of income inequality on fiscal conservatism when an increase in inequality affects the bottom portion of income distribution. It is argued that, contrary to what is generally assumed in the economic literature, inequality will then be associated with less, rather than more, redistributive taxation. Furthermore, if the poor are liquidity constrained then the positive association between inequality and fiscal conservatism will increase the persistence in the dynamics of income distribution and possibly lead to multiple steady states. The existence, under some conditions, of a dynamic voting equilibrium is shown and some of its properties are studied.

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File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=998
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 998.

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Date of creation: Jul 1994
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Handle: RePEc:cpr:ceprdp:998
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  1. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May.
  2. Gilles Saint-Paul, 2001. "The Dynamics of Exclusion and Fiscal Conservatism," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 275-302, April.
  3. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  4. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
  5. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
  6. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  7. 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.
  8. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  9. Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 211-35, April.
  10. Lars Osberg, 1998. "Economic Insecurity," Discussion Papers 0088, University of New South Wales, Social Policy Research Centre.
  11. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  12. Saint-Paul, G. & Verdier, T., 1991. "Education, Democracy and growth," DELTA Working Papers 91-27, DELTA (Ecole normale supérieure).
  13. Xavier Sala-i-Martin, 1995. "A positive theory of social security," Economics Working Papers 108, Department of Economics and Business, Universitat Pompeu Fabra.
  14. Piketty, Thomas, 1997. "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 173-89, April.
  15. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-81, September.
  16. Loury, Glenn C, 1981. "Intergenerational Transfers and the Distribution of Earnings," Econometrica, Econometric Society, vol. 49(4), pages 843-67, June.
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