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Income Redistribution and the Diversity of Consumer Goods

Paul Maarek (), Renaud Bourlès () and Michael Dorsch ()

No 2014-21, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Reductions in the generosity of welfare benefits and less progressive taxation have decreased the redistributive impact of fiscal policy since the mid-1990’s across the advanced democracies. We argue that the strong increase in the diversity of goods observed those last decades may have modified preferences for redistribution differently across groups in society and affected the political equilibrium tax rate. We show that if the share of diversified goods compared to that of basic (necessary) goods in the consumption bundle sufficiently increases with income, relatively rich consumers could disproportionately benefit from an increase in the diversity of goods. Consequently we show in a probabilistic voting model that this could lead to a decrease in the equilibrium tax rate. We then empirically demonstrate, using fixed effect regressions over a a panel of OECD countries, that there exists a strong correlation between our proxies for the diversity of goods and our proxies for the degree of fiscal redistribution.

Keywords: Redistribution; Diversity of goods; Taxation; Probabilistic voting (search for similar items in EconPapers)
JEL-codes: D72 D78 H24 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cdm and nep-pbe
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Journal Article: Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach (2019) Downloads
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