Abstract:
Federal, state, and many local governments make decisions that involve taxation, redistribution, and provision of public goods. Positive models to study these issues encounter the well-known problem that majority-voting equilibrium (MVE) may fail to exist in such multidimensional models. In this paper, with reasonable restrictions on preferences, I provide sufficient conditions for the existence of an MVE in a model with linear income tax and government expenditure policies that affect individual labor/leisure choices. My majority-voting result takes account of the possibility that low-skill individuals will drop out of the labor force under some tax and expenditure configurations. Copyright 2007 Blackwell Publishing, Inc..