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

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  • Loukas Balafoutas

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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.

Suggested Citation

  • Loukas Balafoutas, 2009. "How much income redistribution? An explanation based on vote-buying and corruption," Working Papers 2009-29, Faculty of Economics and Statistics, University of Innsbruck.
    • Handle: RePEc:inn:wpaper:2009-29
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    References listed on IDEAS

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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.
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    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.

    More about this item

    Keywords

    tax rates; vote-buying; lobbying; government corruption;

    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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