Voting under temptation

Monisankar Bishnu () and Min Wang ()
Additional contact information
Monisankar Bishnu: Indian Statistical Institute, New Delhi
Min Wang: Michigan State Universitywth

Discussion Papers from Indian Statistical Institute, Delhi

Abstract: In the presence of temptation and self-control preferences as in Gul and Pesendorfer, the optimal policy is to subsidize savings when consumers are tempted by "excessive" impatience (Krusell, Kuruscu and Smith, 2010). However, in the homogeneous agents model, taxation loses an important property in that it fails to reduce the inequality through redistribution. Thus the phenomenon that welfare improves on subsidizing savings may vanish when the agents differ in their abilities to earn income. They may well choose a positive tax if they are from low ability group where the redistribution effect of tax dominates the temptation effect. In a political economy, a situation may easily arise where a negative tax will never be implemented. When agents are homogeneous, as temptation grows, optimal subsidy on saving increases. The corresponding result in the heterogeneous agents case is that as temptation grows, the political support for the subsidy increases.

Keywords: Temptation; self-control; optimal tax; voting (search for similar items in EconPapers)
Pages: 24 pages
Date: 2012-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.isid.ac.in/~pu/dispapers/dp12-03.pdf (application/pdf)

Related works:
Journal Article: Voting under temptation (2013)
Working Paper: Voting under temptation (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:alo:isipdp:12-03

Access Statistics for this paper

More papers in Discussion Papers from Indian Statistical Institute, Delhi Contact information at EDIRC.
Bibliographic data for series maintained by Debasis Mishra ().