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Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach

Author

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  • Renaud Bourlès

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Michael Dorsch

    (CEU - Central European University [Budapest, Hongrie])

  • Paul Maarek

    (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas)

Abstract

After‐tax income inequality has risen since the mid‐1990s, as increases in market income inequality have not been offset by greater fiscal redistribution. We argue that the substantial increase in the diversity of consumer goods has mitigated mounting political pressures for redistribution. Within a probabilistic voting framework, we demonstrate that if the share of diversified goods in the consumption bundle increases sufficiently with income, then an increase in goods diversity can reduce the political equilibrium tax rate. Focusing on OECD countries, we find empirical support for both the model's micro‐political foundations and the implied relation between goods diversity and fiscal policy outcomes.

Suggested Citation

  • Renaud Bourlès & Michael Dorsch & Paul Maarek, 2019. "Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach," Post-Print hal-02474671, HAL.
    • Handle: RePEc:hal:journl:hal-02474671
    DOI: 10.1111/sjoe.12307
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02474671v1
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    2. Renaud Bourlès & Michael T. Dorsch & Paul Maarek, 2019. "Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 960-993, July.

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    Keywords

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    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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