 Environment and EquilibriumAlbert J. Lee ()
Chapter Chapter 2 in Taxation, Growth and Fiscal Institutions, 2012, pp 5-19 from Springer Abstract: Abstract This chapter models the connections between the redistributive tax rate and income inequality in a dynamic tax game embedded in an overlapping generation model with heterogeneous agents. In the first period, agents vote and work; in the second period, they consume. The source of heterogeneity within the same generation is endorsed due to differences in labor efficiency among the agents. The existence and stability of the political–economic equilibrium is shown to exist. In accordance to the wishes of the median voter, government redistributes the tax revenue completely to the young. This process is repeated in subsequent time periods. Each agent, based on his selection of policy, maximizes his lifetime indirect utility, subject to his personal constraints. Nash equilibria are sub optimal, under the assumption of sequential rationality. Hence, agents have an incentive to cooperate. Keywords: Cooperation; Coordination; Dynamic general equilibrium; Median voter; Nash equilibrium; Policy commitment; Ramsey equilibrium; Two-period overlapping generations model (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:spbrcp:978-1-4614-1290-8_2 Ordering information: This item can be ordered from DOI: 10.1007/978-1-4614-1290-8_2 Access Statistics for this chapter More chapters in SpringerBriefs in Business from Springer |
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