Tax Policy Design in The Presence of Social Preferences: Some Experimental Evidence

Lucy F. Ackert (), Jorge Martinez-Vazquez () and Mark Rider ()
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Mark Rider: Andrew Young School of Policy Studies, Georgia State University, http://aysps.gsu.edu/RiderM.html

International Studies Program Working Paper Series, at AYSPS, GSU from International Studies Program, Andrew Young School of Policy Studies, Georgia State University

Abstract: This paper reports the results of experiments designed to examine whether a taste for fairness affects people’s preferred tax structure. Building on the Fehr and Schmidt (1999) model we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing between alternative tax structures. However, concern for redistribution decreases when it leads to increasing deadweight losses. Our findings have important implications for the design of optimal tax theory.

Keywords: tax policy; social preferences; fairness (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-pbe, nep-pol and nep-pub
Date: 2004-11-01
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Working Paper: Tax policy design in the presence of social preferences: some experimental evidence (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:ays:ispwps:paper0425

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