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Redistribution, Taxes, and the Median Voter

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  • Marco Bassetto

    () (Research Department Federal Reserve Bank of Chicago)

  • Jess Benhabib

Abstract

We study a simple model of production, accumulation, and redistribution, where agents are heterogeneous in their initial wealth, and a sequence of redistributive tax rates is voted upon. Though the policy is infinite-dimensional, we prove that a median voter theorem holds if households have identical, Gorman aggregable preferences; furthermore, the tax policy preferred by the median voter has the "bang-bang" property

Suggested Citation

  • Marco Bassetto & Jess Benhabib, 2006. "Redistribution, Taxes, and the Median Voter," 2006 Meeting Papers 78, Society for Economic Dynamics.
  • Handle: RePEc:red:sed006:78
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    Cited by:

    1. Marina Azzimonti & Eva de Francisco & Per Krusell, 2006. "The political economy of labor subsidies," 2006 Meeting Papers 588, Society for Economic Dynamics.
    2. Alessandro Riboni & Facundo Piguillem, 2011. "Dynamic Bargaining over Redistribution in Legislatures," 2011 Meeting Papers 1320, Society for Economic Dynamics.
    3. Bishnu, Monisankar & Wang, Min, 2013. "Voting under temptation," Economics Letters, Elsevier, vol. 118(3), pages 419-423.
    4. Juan Carlos Conesa & Begona Dominguez, 2020. "Capital Taxes and Redistribution: The Role of Management Time and Tax Deductible Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 156-172, July.
    5. Azzimonti, Marina & de Francisco, Eva & Krusell, Per, 2008. "Production subsidies and redistribution," Journal of Economic Theory, Elsevier, vol. 142(1), pages 73-99, September.
    6. Ludwig Straub & Iván Werning, 2014. "Positive Long Run Capital Taxation: Chamley-Judd Revisited," NBER Working Papers 20441, National Bureau of Economic Research, Inc.
    7. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
    8. Gourio, François, 2009. "Is there a majority to support a capital tax cut?," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1278-1295, June.
    9. Daniel Carroll & Jim Dolmas & Eric Young, 2021. "The Politics of Flat Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 174-201, January.
    10. Lopez-Velasco, Armando R., 2020. "Voting over redistribution in the Meltzer–Richard model under interdependent labor inputs," Economics Letters, Elsevier, vol. 192(C).
    11. Facundo Piguillem & Anderson Schneider, 2013. "Heterogeneous Labor Skills, The Median Voter and Labor Taxes," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 332-349, April.
    12. Borissov, Kirill & Surkov, Alexander, 2010. "Endogenous growth in a model with heterogeneous agents and voting on public goods," MPRA Paper 27517, University Library of Munich, Germany.
    13. Juan Carlos Conesa & Begona Dominguez, 2020. "Capital Taxes and Redistribution: The Role of Management Time and Tax Deductible Investment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 156-172, July.
    14. César Martinelli & John Duggan, 2014. "The Political Economy of Dynamic Elections: A Survey and Some New Results," Working Papers 1403, Centro de Investigacion Economica, ITAM.
    15. Dotti, Valerio, 2019. "Political Parties and Policy Outcomes. Do Parties Block Reforms?," MPRA Paper 100227, University Library of Munich, Germany.
    16. Odran Bonnet & Guillaume Chapelle & Alain Trannoy & Etienne Wasmer, 2019. "Secular Trends in Wealth and Heterogeneous Capital: Land is Back... and Should Be Taxed," Sciences Po Economics Discussion Papers 2019-14, Sciences Po Departement of Economics.
    17. Ruediger Bachmann & Jinhui Bai, 2013. "Politico-Economic Inequality and the Comovement of Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 565-580, October.
    18. Chari, V.V. & Nicolini, Juan Pablo & Teles, Pedro, 2020. "Optimal capital taxation revisited," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 147-165.
    19. Jean Guillaume Forand & John Duggan, 2013. "Markovian Elections," Working Papers 1305, University of Waterloo, Department of Economics, revised Oct 2013.
    20. Yuta Saito, 2019. "Political Representation and Legislative Bargaining over Redistribution," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(3), pages 251-262, August.
    21. Sita Nataraj Slavov, 2014. "Public Versus Private Provision of Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(2), pages 222-258, April.

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    More about this item

    Keywords

    Median voter; gorman aggregation; capital income taxes;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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