Equilibrium Redistribution under Ex-ante Heterogeneity and Income-Dependent Voting

Bo Hyun Chang, Yongsung Chang and Sun-Bin Kim

Working Paper Series from Institute of Economic Research, Seoul National University

Abstract: From a utilitarian point of view, the optimal income tax rate in the U.S. should be much higher than the current one (e.g., Piketty and Saez (2013)). A majority of the population would be in favor of raising taxes, as the income distribution is highly skewed. We show that the political equilibrium is actually close to the current tax rate, once we take into account (i) the ex-ante heterogeneity of earnings (Guvenen, 2009) and (ii) income-dependent voting behavior (Mahler, 2008) across households.

Keywords: Optimal Tax; Ex-ante Heterogeneity; Voting Turnout Rates (search for similar items in EconPapers)
JEL-codes: E62 H21 H31 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-mac and nep-ore
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