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Tax policy design in the presence of social preferences: some experimental evidence

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  • Lucy F. Ackert
  • Jorge Martinez-Vazquez
  • Mark Rider

Abstract

This paper reports the results of experiments designed to examine whether a taste for fairness affects people’s preferred tax structure. Building on the Fehr and Schmidt (1999) model, we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing among alternative tax structures. However, concern for redistribution decreases when it leads to increasing deadweight losses. Our findings have important implications for the design of optimal tax theory.

Suggested Citation

  • Lucy F. Ackert & Jorge Martinez-Vazquez & Mark Rider, 2004. "Tax policy design in the presence of social preferences: some experimental evidence," FRB Atlanta Working Paper 2004-33, Federal Reserve Bank of Atlanta.
  • Handle: RePEc:fip:fedawp:2004-33
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    Cited by:

    1. Friedrich Heinemann & Martin Kocher, 2013. "Tax compliance under tax regime changes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(2), pages 225-246, April.
    2. Höchtl, Wolfgang & Sausgruber, Rupert & Tyran, Jean-Robert, 2012. "Inequality aversion and voting on redistribution," European Economic Review, Elsevier, vol. 56(7), pages 1406-1421.
    3. Schildberg-Hörisch, Hannah, 2010. "Is the veil of ignorance only a concept about risk? An experiment," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 1062-1066, December.
    4. Leonardo Becchetti & Giacomo Degli Antoni & Stefania Ottone & Nazaria Solferino, 2011. "Spectators versus stakeholders with or without veil of ignorance: The difference it makes for justice and chosen distribution criteria," Working Papers 204, ECINEQ, Society for the Study of Economic Inequality.
    5. Jorge Martinez-Vazquez & Mark Rider & Lucy F. Ackert & Ann Gillette, 2005. "Experimental Evidence for Tax Policy Design (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0517, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    6. Leonardo Becchetti & Giacomo Degli Antoni & Stefania Ottone & Nazaria Solferino, 2012. "Spectators Versus Stakeholders with/without Information: the Difference it Makes for Justice," CEIS Research Paper 221, Tor Vergata University, CEIS, revised 20 Feb 2012.

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