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Representative Democracy and Marginal Rate Progressive Income Taxation

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Abstract

This paper develops a political economy model that is consistent with the fact that democracies have a preference for increasing marginal tax rates on income. We present a model in which there is an exogenous set of political parties with preferences over the set of admissible tax schedules. This set contains virtually any increasing and piecewise linear continuous function. Each party decides whether or not to present a candidate for election. There is a fixed cost of running. The elected candidate implements one of her preferred tax policies. Our main results provide conditions under which a Strong Nash Equilibrium exists, and a tax schedule with increasing marginal tax rates is implemented in some Nash Equilibria and in any Strong Nash Equilibrium.

Suggested Citation

  • Carbonell, O. & Klor, E., 2000. "Representative Democracy and Marginal Rate Progressive Income Taxation," Working Papers 00-12, C.V. Starr Center for Applied Economics, New York University.
  • Handle: RePEc:cvs:starer:00-12
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    File URL: http://econ.as.nyu.edu/docs/IO/9188/RR00-12.PDF
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    Citations

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    Cited by:

    1. Dhammika Dharmapala & Etienne Lehmann, 2003. "A Median Voter Theorem for Postelection Politics," Working papers 2003-47, University of Connecticut, Department of Economics.
    2. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09i8hj22lpn is not listed on IDEAS
    3. Carbonell-Nicolau Oriol, 2009. "A Positive Theory of Income Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-49, July.
    4. John Roemer, 2012. "The political economy of income taxation under asymmetric information: the two-type case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 3(1), pages 181-199, March.
    5. Jenny de Freitas, 2009. "A probabilistic voting model of progressive taxation with incentive effects," Hacienda Pública Española, IEF, vol. 190(3), pages 9-26, September.
    6. Rafael Salas & Juan Rodríguez, 2013. "Popular support for social evaluation functions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(4), pages 985-1014, April.
    7. Zsofia Barany, 2011. "Income inequality and the progressivity of taxes in a coalition formation model," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
    8. Llavador, Humberto & Carbonell-Nicolau, Oriol, 2018. "Inequality reducing properties of progressive income tax schedules: the case of endogenous income," Theoretical Economics, Econometric Society, vol. 13(1), January.
    9. Oriol Carbonell-Nicolau & Efe Ok, 2004. "Multidimensional income taxation and electoral competition: an equilibrium analysis," Departmental Working Papers 200407, Rutgers University, Department of Economics.
    10. Carbonell-Nicolau, Oriol & Ok, Efe A., 2007. "Voting over income taxation," Journal of Economic Theory, Elsevier, vol. 134(1), pages 249-286, May.
    11. Rafael Salas & Juan Gabriel Rodríguez, 2010. "Popular support for egalitarian social welfare," Working Papers 171, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    REPRESENTATIVE DEMOCRACY; MARGINAL RATE PROGRESSIVE INCOME TAXATION.;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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