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Redistributive Taxation With Endogenous Sentiments

Author

Listed:
  • Joan Esteban

    (Institut d'Analisi Economica, CSIC, and Universitat Pompeu Fabra)

  • Laurence Kranich

    (University at Albany, SUNY)

Abstract

. We present a model in which an individual's sentiments toward others are determined endogenously on the basis of how they perform relative to the societal average. This, in turn, affects the individual's own behavior and hence other agents' sentiments toward her. We focus on stationary patterns of utility interdependence. To demonstrate the effects of such endogeneity, we consider an example of a production economy with redistributive taxation. There are two types of stationary equilibria: one in which all agents conform to the societal norm, and a second involving social stratification on the basis of productivity into two or three groups. The main conclusion is that the tax structure, in that it affects behavior which in turn affects sentiments, plays a crucial role in determining which type of equilibrium occurs and its characteristics as well as the extent of altruism and social cohesion in society.

Suggested Citation

  • Joan Esteban & Laurence Kranich, "undated". "Redistributive Taxation With Endogenous Sentiments," Working Papers 33-02 Classification-JEL , Instituto de Estudios Fiscales.
    • Handle: RePEc:hpe:wpaper:y:2002:i:33
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    Citations

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    Cited by:

    1. Gabrieli, Tommaso, "undated". "Beliefs And Redistributive Politics Under Incomplete Information," Economic Research Papers 269770, University of Warwick - Department of Economics.
    2. Alejandro Lugon Ceruti, 2012. "Endogenous Altruism In The Long Run," Documentos de Trabajo / Working Papers 2012-348, Departamento de Economía - Pontificia Universidad Católica del Perú.
    3. Robin Boadway & Nicolas Marceau & Steeve Mongrain, 2007. "Redistributive Taxation under Ethical Behaviour," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 505-529, September.
    4. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 699-746.
    5. Erik Alencar de Figueiredo, 2012. "Fairness and Redistribution- the Case of Latin American Countries," Série Textos para Discussão (Working Papers) 3, Programa de Pós-Graduação em Economia - PPGE, Universidade Federal da Paraíba.
    6. Laurence Kranich & Matteo Cervellati & Joan Esteban, 2006. "The Social Contract with Endogenous Sentiments," Discussion Papers 06-06, University at Albany, SUNY, Department of Economics.
    7. Platteau, Jean-Philippe & Seki, Erika, 2007. "Heterogeneity, social esteem and feasibility of collective action," Journal of Development Economics, Elsevier, vol. 83(2), pages 302-325, July.
    8. Paola Profeta, 2007. "Political support and tax reforms with an application to Italy," Public Choice, Springer, vol. 131(1), pages 141-155, April.
    9. Laurence Kranich & Joan Esteban, 2002. "A Theory of Endogenous Sentiments," Discussion Papers 02-11, University at Albany, SUNY, Department of Economics.

    More about this item

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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