The Dynamics of Social Identity, Inequality and Redistribution

Christian Ghiglino and Müller, Andreas
Authors registered in the RePEc Author Service: Andreas Müller

No 18638, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We provide a politico-economic theory of income redistribution with endogenous social identity of voters. Our analysis uncovers a non-monotonic relationship between market income inequality and redistributive taxation in line with the mixed evidence on the sign of their empirical relationship: taxation first increases with wage inequality as all voters identify with others, but then drops sharply as affluent voters switch to identify in-group. We further add ethnicity as an identification attribute. Consistent with existing empirical evidence, our model predicts that the presence of ethnic minorities and across ethnic group inequality reduce redistribution, while within ethnic group wage inequality increases it.

Keywords: Social identity; Tax rate; Redistribution; Inequality; Ethnicity; Social class; Probabilistic voting (search for similar items in EconPapers)
JEL-codes: D64 D71 D72 H20 (search for similar items in EconPapers)
Date: 2023-11
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