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Equilibrium tax rates and income redistribution: A laboratory study

Marina Agranov and Thomas Palfrey

Journal of Public Economics, 2015, vol. 130, issue C, 45-58

Abstract: This paper reports results from a laboratory experiment that investigates the Meltzer–Richard model of equilibrium tax rates, inequality, and income redistribution. The experiment varies the amount of wage inequality and the political process used to determine tax rates. We find that higher inequality leads to higher tax rates; the effect is significant and large in magnitude. The tax rates and labor supply functions are both quantitatively close to the theory. The result is robust to the political institution. The theoretical model of Meltzer–Richard is extended to incorporate social preferences in the form of altruism and inequity aversion, which are found to have negligible effects in the data.

Keywords: Voting; Taxes; Meltzer–Richard; Experiment (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:130:y:2015:i:c:p:45-58

DOI: 10.1016/j.jpubeco.2015.08.008

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