Unequal Societies

Roland Benabou

No 1419, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper seeks to explain the significant variations in the social contract observed across nations. It shows how countries with similar technologies and preferences, as well as equally democratic political systems, can sustain very different average and marginal tax rates. Similarly, it provides an explanation for the striking difference between the US and European systems of education finance and health insurance. With imperfect credit and insurance markets some redistributive policies can have a positive effect on output, growth, or more generally ex-ante welfare. Aggregate efficiency gains, in turn, imply a very different political economy from that of standard models: the extent of political support for such redistributions decreases with the degree of inequality, at least over some range. Moreover, capital market imperfections make future earning a function of current resources. Hence there exists potential for multiple steady states, with mutually reinforcing high inequality and low redistribution, or vice versa. Temporary shocks to the distribution of income or the political system can then have permanent effects.

Keywords: Education Finance; Income Distribution; Inequality; Political Economy; Social Contract; Taxation; Welfare State (search for similar items in EconPapers)
JEL-codes: D31 E62 I22 O41 P16 (search for similar items in EconPapers)
Date: 1996-06
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1419 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Unequal Societies (1996)
Working Paper: Unequal Societies (1996)
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:cpr:ceprdp:1419

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1419

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().