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How much income redistribution? An explanation based on vote-buying and corruption

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Listed author(s):
  • Loukas Balafoutas

    ()

Abstract

This paper studies how income tax rates are determined and how they are related to government corruption in the form of fund capture. A model is presented where rich voters can block redistribution by buying the votes of some poor voters. In equilibrium there is only limited redistribution and income tax rates are a negative function of government corruption. When rich voters can bribe the government, an additional equilibrium with zero taxation is possible. The link between corruption and tax rates is tested using cross country data; the empirical evidence is fully consistent with the predictions of the model.

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File URL: https://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2009-29.pdf
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Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2009-29.

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Length: 40
Date of creation: Dec 2009
Handle: RePEc:inn:wpaper:2009-29
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Keywords: tax rates; vote-buying; lobbying; government corruption;

Other versions of this item:

Find related papers by JEL classification:
  • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
  • H2 - Public Economics - - Taxation, Subsidies, and Revenue
  • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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  1. Fernández, Raquel & Levy, Gilat, 2008. "Diversity and redistribution," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 925-943, June.
  2. Roland Benabou & Efe A. Ok, 2001. "Social Mobility and the Demand for Redistribution: The Poum Hypothesis," The Quarterly Journal of Economics, Oxford University Press, vol. 116(2), pages 447-487.
  3. Harms, Philipp & Zink, Stefan, 2003. "Eating the Rich vs. Feeding the Poor: Borrowing Constraints and the Reluctance to Redistribute," Public Choice, Springer, vol. 116(3-4), pages 351-366, September.
  4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
  5. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2011. "Emergence And Persistence Of Inefficient States," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 177-208, 04.
  6. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
  7. Christian Traxler, 2009. "Voting over taxes: the case of tax evasion," Public Choice, Springer, vol. 140(1), pages 43-58, July.
  8. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May.
  9. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 265-286.
  10. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
  11. Bockstette, Valerie & Chanda, Areendam & Putterman, Louis, 2002. "States and Markets: The Advantage of an Early Start," Journal of Economic Growth, Springer, vol. 7(4), pages 347-369, December.
  12. Sanyal, Amal & Gang, Ira N & Goswami, Omkar, 2000. "Corruption, Tax Evasion and the Laffer Curve," Public Choice, Springer, vol. 105(1-2), pages 61-78, October.
  13. Olken, Benjamin A., 2006. "Corruption and the costs of redistribution: Micro evidence from Indonesia," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 853-870, May.
  14. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  15. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
  16. repec:hrv:faseco:30747160 is not listed on IDEAS
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Cited by:

  1. Luna Bellani & Heinrich Ursprung, 2016. "The Political Economy of Redistribution Policy," CESifo Working Paper Series 6189, CESifo Group Munich.

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