Income inequality, size of government, and tax progressivity: A positive theory
| Autor: | Valerio Dotti |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
Economics and Econometrics
Labour economics media_common.quotation_subject 05 social sciences Redistribution (cultural anthropology) Condorcet method Public good Tax rate Competition (economics) Economic inequality Government Voting Redistribution 0502 economics and business Progressive tax Economics Tax system 050207 economics Settore SECS-P/01 - Economia Politica Finance 050205 econometrics media_common |
| Zdroj: | European Economic Review. 121:103327 |
| ISSN: | 0014-2921 |
| DOI: | 10.1016/j.euroecorev.2019.103327 |
| Popis: | I investigate the relationship between income inequality and the composition of public spending in redistributive policies. I extend the Meltzer–Richard model of voting over redistribution allowing voters to choose not only the amount of a uniform lump-sum transfer, but also the level of provision of a public good. The governmental budget is balanced; thus these two choices determine the tax rate on labor income. The multidimensionality of the policy space implies that there is no Condorcet winner. I adopt a citizen-candidate model of electoral competition to tackle this problem. I show that the progressivity of the tax system is increasing in the mean-to-median income ratio while the size of the government need not be. This means that higher income inequality implies a more progressive tax system but, in contrast with the traditional analysis, it may also result in a smaller size of government. Such results are consistent with the most recent findings in the empirical literature. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|
Full Text from ScienceDirect