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Income inequality and the tax structure: Evidence from developed and developing countries

  • Adam, Antonis
  • Kammas, Pantelis
  • Lapatinas, Athanasios

This paper seeks to examine the effect of income inequality on the structure of tax policies. We first use a simplified theoretical framework which allows us to formalize the testable implications of the relevant literature. Subsequently, our analysis indicates that more unequal economies rely heavier on capital relative to labor income taxation. This relationship remains robust across various alternative measures of income inequality and most importantly through alternative political regimes. In addition, our analysis places the spotlight on the potential reverse causality between income inequality and structure of the tax policies and seeks to address it by making use of the most appropriate data and techniques.

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File URL: http://mpra.ub.uni-muenchen.de/46148/1/MPRA_paper_46148.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46148.

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Date of creation: 12 Apr 2013
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Handle: RePEc:pra:mprapa:46148
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