 An allegory of the political influence of the top 1%Philippe De Donder and John Roemer Business and Politics, 2016, vol. 18, issue 1, 85-96 Abstract: We study how rich shareholders use their political influence to deregulate firms that they own, thus skewing the income distribution towards themselves. Individuals differ in productivity and choose how much labor to supply. High productivity individuals also own shares in the productive sector and thus earn capital income. All individuals vote over a linear tax rate on (labor and capital) income whose proceeds are redistributed lump sum. Shareholders also lobby in order to ease the price cap imposed on the private firm. We first solve analytically for the Kantian equilibrium of this lobbying game together with the majority voting equilibrium over the tax rate. We then proceed to a comparative statics analysis of the model with the help of numerical simulations. We obtain that, as the capital income distribution becomes more concentrated among the top productivity individuals, increased lobbying effort generates efficiency as well as equity costs, with lower labor supply and lower average utility levels in society. Date: 2016 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cup:buspol:v:18:y:2016:i:01:p:85-96_00 Access Statistics for this article More articles in Business and Politics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK. |
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