The political economy of endogenous taxation and redistribution
This paper examines a simple dynamic model in which agents vote over capital income taxation and redistributive transfers. We show that in equilibrium the typical agent's preferences over the tax rate are single-peaked and derive a closed-form solution for the majority-rule tax rate. We also show that high levels of initial wealth inequality can place the economy on the 'wrong side of the Laffer curve'.
|Date of creation:||1997|
|Note:||Published as: Dolmas, Jim and Gregory W. Huffman (1997), "The Political Economy of Endogenous Taxation and Redistribution," Economics Letters 56 (2): 223-227.|
|Contact details of provider:|| Web page: http://www.dallasfed.org/|
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- Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
- Huffman, Gregory W., 1996.
"Endogenous tax determination and the distribution of wealth,"
9605, Federal Reserve Bank of Dallas.
- Huffman, Gregory W., 1996. "Endogenous tax determination and the distribution of wealth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 207-242, December.
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