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Redistributive Taxation with Endogenous Sentiments

Laurence Kranich () and Joan Esteban ()

Discussion Papers from University at Albany, SUNY, Department of Economics

Abstract: In this paper we present a model in which an individual's sentiments toward others are affected by how they behave relative to the societal norm. 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, and a second involving social stratification on the basis of productivity 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: D64 Z13 H23 (search for similar items in EconPapers)
Date: 2002
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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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