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Inequality, Mobility and Redistributive Taxation in a Finance-constrained Economy


  • Ryo Arawatari

    () (Faculty of Economics, Shinshu University)

  • Tetsuo Ono

    () (Graduate School of Economics, Osaka University)


This paper presents a simple model that displays a joint determination of income inequality and intergenerational mobility affected by redistributive taxation. The model shows that a larger redistribution improves equality and utility and enhances mobility when the poor are financially constrained, however it creates a trade-off between the rich and the poor in terms of utility when the poor are financially unconstrained. The model also shows that the size of the redistribution as well as wage inequality play key roles in explaining the cross-country differences in inequality and mobility among OECD countries.

Suggested Citation

  • Ryo Arawatari & Tetsuo Ono, 2009. "Inequality, Mobility and Redistributive Taxation in a Finance-constrained Economy," Discussion Papers in Economics and Business 09-28, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:0928

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    More about this item


    inequality; Gini coefficient; intergenerational mobility; redistributive taxation; financial constraints.;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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