Redistribution, taxes, and the median voter

Marco Bassetto; Jess Benhabib

doi:10.1016/j.red.2006.02.001

Redistribution, taxes, and the median voter

Marco Bassetto, Jess Benhabib

Research output: Contribution to journal › Article › peer-review

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.

Original language	English (US)
Pages (from-to)	211-223
Number of pages	13
Journal	Review of Economic Dynamics
Volume	9
Issue number	2
DOIs	https://doi.org/10.1016/j.red.2006.02.001
State	Published - Apr 2006

Keywords

Capital income taxes
Gorman aggregation
Median voter
Redistribution

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/j.red.2006.02.001

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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.",

keywords = "Capital income taxes, Gorman aggregation, Median voter, Redistribution",

author = "Marco Bassetto and Jess Benhabib",

note = "Funding Information: We thank Michele Boldrin, Adam Przeworski, and an anonymous referee for comments, and Onur Ozgur for technical assistance. Marco Bassetto thanks the NSF and the Sloan Foundation for financial support. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Chicago, the Federal Reserve System, or NSF.",

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N2 - 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.

AB - 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.

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KW - Gorman aggregation

KW - Median voter

KW - Redistribution

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Redistribution, taxes, and the median voter

Abstract

Keywords

ASJC Scopus subject areas

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