A Probabilistic Voting Model of Progressive Taxation with Incentive Effects

Jenny De Freitas

No 34, DEA Working Papers from Universitat de les Illes Balears, Departament d'Economía Aplicada

Abstract: This paper shows conditions under which a marginally progressive income tax emerges as the outcome of political competition between two parties, when labor is elastically supplied and candidates are uncertain about voters' choice at election day. Assuming the elasticity of labor is decreasing on marginal wage; following Coughlin and Nitzan (1981) only marginal progressive taxes are played by both candidates in equilibrium. If; instead, we adopt Lindbeck and Weibull (1989) probabilistic voting model, the equilibrium tax schedule will be progressive as long as the political power of the rich voter is sufficiently small. The degree of progressivity decreases with population polarization.

Keywords: Political economy; progressive taxation; elastic labor supply. (search for similar items in EconPapers)
JEL-codes: D3 D63 D72 H24 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cdm and nep-pol
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Journal Article: A probabilistic voting model of progressive taxation with incentive effects (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ubi:deawps:34

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