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Identity and Redistribution

Author

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  • Lindqvist, Erik

    () (Research Institute of Industrial Economics (IFN))

  • Östling, Robert

    () (Institute for International Economic Studies, Stockholm University)

Abstract

This paper models the interaction between individuals' identity choices and redistribution. Both redistributive policies and identity choices are endogenous, and there might be multiple equilibria. The model is applied to ethnicity and social class. In an equilibrium with high taxes, the poor identify as poor and favor high taxes. In an equilibrium with low taxes, at least some of the poor identify with their ethnic group and favor low taxes. The model has two main predictions. First, redistribution is highest when society is ethnically homogenous, but the effect of ethnic diversity on redistribution is not necessarily monotonic. Second, when income inequality is low, an increase in income inequality might induce the poor to identify with their ethnic group and therefore favor lower taxes.

Suggested Citation

  • Lindqvist, Erik & Östling, Robert, 2006. "Identity and Redistribution," SSE/EFI Working Paper Series in Economics and Finance 659, Stockholm School of Economics, revised 28 Aug 2009.
  • Handle: RePEc:hhs:hastef:0659
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    More about this item

    Keywords

    Redistribution; social identity; income inequality; ethnic fractionalization; ethnic diversity; social class;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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