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Redistributive Taxation with Endogenous Sentiments

Joan M. Esteban () and Laurence Kranich ()
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Joan M. Esteban: http://www.iae.csic.es

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We present a model in which an individual's sentiments towards others are determined endogenously on the basis of how they perform relative to the societal average. This, in turn, affects the individual's own behavior and hence other agents' sentiments toward her. We focus on stationary patterns of utility interdependence. To demonstrate the effects of such endogeneity, we consider an example of a production economy with redistributive taxation. There are two types of stationary equilibria: one in which all agents conform to the societal norm, into two or three groups. The main conclusion is that the tax structure, in that it affects behavior which in turn affects sentiments, plays a crucial role in determining which type of equilibrium occurs and its characteristics as well as the extent of altruism and social cohesion in society.

JEL-codes: D63 D64 (search for similar items in EconPapers)
Pages: 30
Date: 2002-06-21
New Economics Papers: this item is included in nep-cdm
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http://pareto.uab.es/wp/2002/52902.pdf (application/pdf)

Related works:
Working Paper: Redistributive Taxation with Endogenous Sentiments (2005) Downloads
Working Paper: Redistributive Taxation with Endogenous Sentiments (2003) Downloads
Working Paper: Redistributive Taxation with Endogenous Sentiments (2002) Downloads
Working Paper: REDISTRIBUTIVE TAXATION WITH ENDOGENOUS SENTIMENTS Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:529.02

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