Redistributive Politics with Distortionary Taxation

Benoît SY Crutzen and Nicolas Sahuguet ()

No 5975, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We extend the discussion of redistributive politics across electoral systems to allow for taxation to be distortionary. We allow politicians to choose any tax rate between zero and unity and then redistribute the money collected. We build on the model put forward by Myerson (1993) and Lizzeri and Persico (2001 and 2005) to show that the use of distortionnary taxation can be understood as an analysis of the trade-off between efficiency and targetability. We derive the equilibrium taxes and redistribution schemes with distortions. We show that the presence of distortions makes full taxation unattractive. We also derive the size of the government, the deadweight loss and inequality as a function of distortions.

Keywords: distortionary taxation; redistributive politics (search for similar items in EconPapers)
JEL-codes: D72 D78 H23 H31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-pub
Date: Written
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Journal Article: Redistributive politics with distortionary taxation (2009)
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