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A Contribution to the Positive Theory of Indirect Taxation

Emanuele Canegrati

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper I analyse a probabilistic voting model where self-interested governments set their taxation policies in order to maximise the probabil- ity of winning elections. Society is divided into groups which have di¤erent preferences for the consumption of goods. Results show how candidates are captured by the most powerful groups, which not necessarily repre- sent the median voter but may be located at more extreme positions. The introduction of a probabilistic voting model characterized by the presence of single-minded groups overrules the classic results achieved by the me- dian voter theorem, because it is no longer the position on the income scale to drive the equilibrium policy but the ability of groups to focus on their most preferred goods, instead. This ability allows them to achieve a strong political power which candidates cannot help going along with, because they would lose elections otherwise.

Keywords: Probabilistic Voting Theory; Single-mindedness; Indirect Taxation; Public Expenditure (search for similar items in EconPapers)
JEL-codes: D11 H24 H53 (search for similar items in EconPapers)
Date: 2007-12-05
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pub
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Working Paper: A Contribution to the Positive Theory of Direct Taxation (2007) Downloads
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