Skewness, Tax Progression, and Demand for Redistribution: Evidence from the UK

Kirill Pogorelskiy and Stefan Traub
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Stefan Traub: Helmut-Schmidt-Universitat Hamburg, Germany

CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA

Abstract: We introduce a skewness-based approach to measure tax progression and demand for redistribution. Adapting a novel, quantile-based statistical measure of skewness to right-skewed income distributions, we uncover its political economy foundation, by simultaneously relating the same measure to the classical model of income redistribution due to Meltzer and Richard (1981), to the Prospect Of Upward Mobility (POUM) mechanism due to Benabou and Ok (2001), and to the progressivity of a tax schedule. In an empirical analysis of UK income distributions in 1979 { 2013, we find that skewness has increased over time, with the rich moving further away from the median. While the magnitude of the increase has remained small enough so that observed redistribution (or lack thereof ) could be consistent with POUM hypothesis, more recent periods show an increase in tax progression.

Keywords: quantile skewness; inequality; voting over redistribution; tax progression JEL classification numbers: D31; D63; H20; P16 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-pbe
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