Income inequality and the progressivity of taxes in a coalition formation model - Archive ouverte HAL Access content directly
Preprints, Working Papers, ... Year :

Income inequality and the progressivity of taxes in a coalition formation model

(1)
1
Zsofia Barany

Abstract

In this paper, I relate the degree of progressivity of the income tax scheme to the prevailing income inequality in the society. I find that, consistent with the data, more unequal societies implement more progressive income tax systems. I build a model of political coalition formation, where different income groups have to agree on a tax scheme to finance the public good. I show that, the greater income inequality is, i.e. the further away the rich are from the rest of the population, the less able they are to credibly commit to participating in a coalition. Therefore, as income inequality rises, the rich are increasingly excluded from the design of the income tax scheme. Consequently, the rich bear a larger fraction of the public good, and the tax system becomes more progressive.
Fichier principal
Vignette du fichier
income-inequality.pdf (273.14 Ko) Télécharger le fichier
Origin : Files produced by the author(s)
Loading...

Dates and versions

hal-00972940 , version 1 (03-04-2014)

Identifiers

Cite

Zsofia Barany. Income inequality and the progressivity of taxes in a coalition formation model. 2011. ⟨hal-00972940⟩
79 View
70 Download

Share

Gmail Facebook Twitter LinkedIn More