Redistributive politics with distortionary taxation

Benoît S.Y. Crutzen and Nicolas Sahuguet ()

Journal of Economic Theory, 2009, vol. 144, issue 1, pages 264-279

Abstract: This paper proposes a first step towards a positive theory of tax instruments. We present a model of redistributive politics that extends those of Myerson [R. Myerson, Incentives to cultivate minorities under alternative electoral systems, Amer. Polit. Sci. Rev. 87 (1993) 856-869] and Lizzeri and Persico [A. Lizzeri, N. Persico, The provision of public goods under alternative electoral incentives, Amer. Econ. Rev. 91 (2001) 225-239]. Two politicians compete in terms of targeted redistributive promises financed through distortionary taxes. We solve for the case of both targetable and non-targetable taxes. We prove that there is an imperfect efficiency-targetability trade off on the tax side. Politicians prefer targetable taxes over non-targetable ones, especially when the latter are less efficient. Yet, targetable taxation is always used even when it is very inefficient compared to non-targetable taxes.

Keywords: Redistributive; politics; Distortionary; taxation (search for similar items in EconPapers)
Date: 2009
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Related works:
Working Paper: Redistributive Politics with Distortionary Taxation (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:eee:jetheo:v:144:y:2009:i:1:p:264-279

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