individual taxpayer response to tax cuts 1982 1984 with implications for the revenue maximizing tax rate abstract this paper measures the response of taxpayers to the u s personal rate reductions from 1982 to 1984 a baseline income distribution is created to describe what level and distribution could be expected in the absence of tax changes comparison of this baseline with actual tax return data shows that at least one sixth and probably one quarter of the revenue ascribable to the rate reductions was recouped by changes in taxpayer behavior the data also show that federal income tax revenue would have been maximized at a tax rate of about 35 percent and total income tax revenue maximized at a total tax rate of about 40 percent

preserving religious identity through education economic analysis and evidence from the us abstract this paper models the decision of religious parents to send their children to private religious schools as reflecting their desire to shield their children from external influences and thus preserve their religious identity it follows that when the share of the minority in the local population grows and outside influences become less threatening the demand for separate religious schooling among the members of the religious group decreases this pattern implies concavity in the relationship between enrollment in private and religious schooling and the share of the religious group in the population we present empirical evidence from united states county data on catholic and private school enrollment that strongly supports our theory the paper contributes to a better understanding of the demand for religious education

financing and funding health care optimal policy and political implementability health care financing and funding are usually analyzed in isolation this paper combines the corresponding strands of the literature and thereby advances our understanding of the important interaction between them we investigate the impact of three modes of health care financing namely optimal income taxation proportional income taxation and insurance premiums on optimal provider payment and on the political implementability of optimal policies under majority voting considering a standard multi task agency framework we show that optimal health care policies will generally differ across financing regimes when the health authority has redistributive concerns we show that health care financing also has a bearing on the political implementability of optimal health care policies our results demonstrate that an isolated analysis of optimal provider payment rests on very strong assumptions regarding both the financing of health care and the redistributive preferences of the health authority

income inequality in france 1901 1998 this paper uses data from income tax returns 1915 98 wage tax returns 1919 98 and inheritance tax returns 1902 94 in order to compute homogeneous yearly estimates of income wage and wealth inequality for twentieth century france the main conclusion is that the decline in income inequality that took place during the first half of the century was mostly accidental in france and possibly in a number of other countries as well wage inequality has been extremely stable in the long run and the secular decline in income inequality is for the most part a capital income phenomenon holders of large fortunes were badly hurt by major shocks during the 1914 45 period and they were never able to fully recover from these shocks probably because of the dynamic effects of progressive taxation on capital accumulation and pretax income inequality

the evolution of high incomes in northern america lessons from canadian evidence this paper uses tax statistics to construct new series on canadian top income shares from 1920 to 2000 and provides a systematic comparison with the u s experience as in the united states top income shares in canada display a ushaped pattern over the century with a precipitous drop during world war ii followed by a slower decline until 1970 since the late 1970s top income shares have been increasing dramatically and the very top shares are now as high as in the pre war era as in the united states the recent increase in top income shares is the consequence of a surge in top wages and salaries the canadian experience since the late 1970s does not appear to be well explained by tax changes suggesting that the upward trend in canada derives from the united states perhaps because many high income canadians have an emigration option this in turn suggests that the recent increase in u s personal income top shares is not merely a change in tax reporting behavior the recent sharp increase in top income shares in canada is of the same magnitude at the individual and family level and is not due to an increase in income mobility

common trends and shocks to top incomes a structural breaks approach we use newly compiled top income data and structural breaks techniques to estimate common trends and breaks in inequality across countries over the twentieth century our results both confirm earli

the long run determinants of inequality what can we learn from top income data this paper studies determinants of income inequality using a newly assembled panel of 16 countries over the entire twentieth century we focus on three groups of income earners the rich p99 100

community membership aspirations the link between inequality and redistribution revisited the issue at stake is to explain why redistributive policies may vary so greatly for a given distributional skewness to this end we abandon the stylized median voter and study how distributional tensions can act in many different ways depending on social affinity between the different economic classes and their prospect of upward or downward mobility in particular we consider that socioeconomic group membership through its implied social interactions and peer effects is an important determinant of an individual s outcome hence agents while voting on a social contract must take into account the consequences of their choice over their ex post belonging to a particular community this allows us to shed light on how the endogenous sorting of the population into clusters may interact with the balance of political power leading to a non monotonic relationship through the pattern of community formation in the economy between inequality and the pressure for redistributive policies

electoral uncertainty fiscal policy and macroeconomic fluctuations abstract in this paper we study the link between elections fiscal policy and aggregate fluctuations the setup is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re election shocks the latter are incorporated via a two party model with elections the main theoretical prediction is that forward looking incumbents with uncertain prospects of re election find it optimal to follow relatively shortsighted fiscal policies and that this hurts capital accumulation our econometric estimation using u s data finds a statistically significant link between electoral uncertainty and policy instruments and in turn macroeconomic outcomes

monopoly provision of product quality and warranties an exploration in the theory of multi dimensional screening we address the monopoly problem of designing and pricing a product line of goods distinguished by different quality and warranty levels consumers vary in their evaluations of these attributes so that the problem is one of screening it is sufficiently complex that the local approach commonly used does not work instead we use new techniques for dealing with incentive constraints between nonadjacent consumer types these techniques allow us to characterize optimal allocations that may not be monotonic in particular although the more eager types of buyer do pay higher prices and yield the monopoly higher profit they may receive lower quality or lower warranty coverage we find preference restrictions that restore monotonicity concave risk tolerance implies that warranty coverage increases in type and constant absolute risk aversion implies that quality increases in type

support for public provision of a private good with top up and opt out a controlled laboratory experiment abstract this paper presents the results of a revealed choice experiment testing the theoretical predictions of political economy models regarding public support for a publicly provided private good financed with proportional income taxes when individuals can purchase the good privately and either continue to consume public provision top up or forego public provision opt out but in each case continue to pay income taxes our laboratory results confirm behavior is consistent with the predicted majority preferred tax rate under mixed financing with top up but we identify preferences for significantly higher rates of public provision than predicted under mixed financing with opt out using non parametric regression analysis we explore the relationship between individuals top up and opt out decisions and both their income levels and the implemented tax rates

the mix of social and private provision of goods and services abstract in some countries health insurance and education are supplied as social goods at near zero prices and funded from taxation this paper analyses a case where such provision competes with income supplements as a redistribution device and where taxes or transferable vouchers influence the take up of the social goods compared to alternatives available in a private market each consumer chooses to consume either social or private goods and a vertical market segmentation results from differential demand for quality

economic development and income distribution in japan an assessment of the kuznets hypothesis in this paper the author estimates the income distribution in pre war japan for 1921 39 two sets of statistics were combined national personal income tax data for high income classes and household tax one of the local taxes data in 149 villages 45 towns and 16 cities for low income classes for 1891 1921 a preliminary estimation was attempted based on 39 selected villages towns and cities from this estimation he found a regressing income distribution for the pre war period and a dramatic decrease in inequality between pre war and post war periods the first finding supports the kuznets hypothesis the second does not rather it suggests that the relatively equal distribution in contemporary japan was nor a natural consequence of economic growth but a result of institutional changes immediately after the second world war copyright 1998 by oxford university press

institution shocks and economic outcomes allende s election pinochet s coup and the santiago stock market abstract to study the effect of political and institutional changes on the economy we look at share prices in the santiago exchange during the tumultuous political events that characterized chile in the early 1970s we use a transparent empirical strategy deploying previously unused daily data and exploiting two largely unexpected shocks which involved substantial variation in policies and institutions providing a rare natural experiment allende s election and subsequent socialist experiment decreased share values while the military coup and dictatorship that replaced him boosted them in both cases by magnitudes unprecedented in the literature the most parsimonious interpretation of these share price changes is that they reflected respectively the perceived threat to private ownership of the means of production under a socialist government and its subsequent reversal

is the median voter decisive evidence from referenda voting patterns abstract this paper examines whether the voter with the median income is decisive in local spending decisions previous tests have relied on cross sectional data while we make use of a pair of california referenda to estimate a first difference specification the referenda proposed to lower the required vote share for passing local educational bonding initiatives from 67 to 50 and 67 to 55 respectively we find that voters rationally consider future public service decisions when deciding how to vote on voting rules however the empirical evidence strongly suggests that an income percentile below the median is decisive for majority voting rules especially in communities that have a large share of high income voters with attributes that suggest low demand for public services based on a model that explicitly recognizes that each community contains voters with both high and low demand for public school spending we also find that an increase in the share of low demand voters is associated with a lower decisive voter income percentile for the high demand group this two type model implies that our low demand types individuals over age 45 with no children have demands that are 45 lower than other voters collectively these findings are consistent with high income voters with weak preferences for public educational services voting with the poor against increases in public spending on education

selective versus universal vouchers modelling median voter preferences in education under the majority voting rule a system of universally available vouchers uv is politically less feasible than a system of selective vouchers sv confined to families with incomes equal to or less than median voter income after the introduction of uv public expenditure on education will have to be shared with previous private school users per capita expenditure will then drop and or tax will increase since these events will injure the median voter he will reject uv he will be indifferent between the status quo and sv indifference will turn into enthusiasm however if as can be expected the new regime sv brings effective new competition this abstract was borrowed from another version of this item

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

optimal redistribution with productive social services publicly provided private goods are conventionally considered consumer goods departing from this perspective we analyze the public provision of inputs that improve household productivity e g education and childcare in a two class economy with distorting taxation public provision is always welfare improving with respect to pure taxation given that the public input directly affects household productivity moreover the case for public provision strengthens as households heterogeneity in input demand fades out contrary to consolidated results in the literature the features of optimal provision schemes depend on the nature of publicly provided input namely if it substitutes household productive capacity or just helps households to exploit it

government intervention in production and incentives theory a review of recent contributions national science foundation the commissariat general du plan and the center for energy policy research at m i t

the religious factor in private education abstract we quantify the religious factor in private education in the united states by calibrating a political economy model of school choice among public private nonsectarian and subsidized religious schools in which parents differ in their incomes and in their preferences for religious education this shows strong latent demand for religious schooling conditioned on current subsidized tuition levels in parochial schools which is suppressed by the need to pay twice for private education applying the results of the calibration to gauge the effect of means tested school voucher programs on religious and nonsectarian private enrollment we find that when the amount of the voucher is relatively small including subsidized religious schools in such programs is necessary for providing low income families effective access to private education

income inequality in the united states 1913 1998 this paper presents new homogeneous series on top shares of income and wages from 1913 to 1998 in the united states using individual tax returns data top income and wages shares display a u shaped pattern over the century our series suggest that the large shocks that capital owners experienced during the great depression and world war ii have had a permanent effect on top capital incomes we argue that steep progressive income and estate taxation may have prevented large fortunes from fully recovering from these shocks top wage shares were flat before world war ii dropped precipitously during the war and did not start to recover before the late 1960s but are now higher than before world war ii as a result the working rich have replaced the rentiers at the top of the income distribution

the politics of public provision of education public provision of education is usually viewed as a form of redistribution in kind however does it arise when income redistribution is feasible as well i analyze a two dimensional model of political decision making with endogenous political parties society chooses both the tax rate and the allocation of the revenues between income redistribution and public education agents differ in their income and in their age where young agents prefer public education and the old prefer income redistribution i find that when the cohort size of the young is not too large then public education arises as a political compromise between the rich and the young segment of the poor they collude in order to reduce the size of government which benefits the rich and target some of its resources to education which benefits the young poor when the cohort size of the young is too large however income redistribution crowds out public provision of education in the political equilibrium

the effect of rising income inequality on taxation and public expenditures evidence from u s municipalities and school districts 1970 2000 the income distribution in many developed countries widened dramatically from 1970 to 2000 some scholars argue that income inequality contributes to a host of social ills by undermining voters will ingness to support public expenditures in contrast we find that growing income inequality is associated with an expansion in government reven ues and expenditures on a wide range of services in u s municipalities and school districts results are robust to a number of model specifica tions including instrumental variables that address the endogeneity of the local income distribution our results are inconsistent with models pre dicting that heterogeneous societies provide lower levels of public goods public sector 3 two types of identification problems com plicate estimation of the empirical relationship between income inequality and public goods provision the cross country variation often used for this exercise suffers from omitted variable bias that is countries with high income inequality may also have other characteristics that could limit the size of the public sector cross state comparisons also suffer from endogenous household sorting if low or high income families migrate to states with high public expenditures the positive association observed in the litera ture between state public expenditures and income inequal ity may be spurious in this paper we examine the relationship between income inequality and government finances in municipali ties and school districts in the united states from 1970 to 2000 local government represents a large segment of the economy in fiscal year 2009 local governments disbursed more than 3 trillion for such important services as educa tion and public safety 4 our study has several advantages over existing empirical work first the large number of local governments in our data exhibit much greater variation in income inequality over time than do the small number of countries or states used in previous studies a large sample size allows us to separately control for changes in the top end or bottom end of the income distribution and for initial levels of inequal ity thus ruling out a mechanical association between tax revenues and rising income for the affluent second we develop an instrumental variable strategy to mitigate con cerns about potential reverse causality from the endogenous

unequal english wealth since 1670 new data on probated wealth landownership debts and occupations extend our view of the distribution of english wealth back from 1911 to 1670 there were widening gaps in mean wealth between the top landed plus merchant classes and the middle classes across the industrial revolution century size distributions for individual assets also widened so did those for income or total wealth including human but nonhuman net worth did not become more unequal because of important shifts in the land share all inequality measures before 1914 exceeded all those since 1950 the estimates illuminate classical theories of distribution

majority voting in a model of means testing abstract we study a model of endogenous means testing where households differ in their income and where the in kind transfer received by each household declines with income majority voting determines the two dimensions of public policy the size of the welfare program and the means testing rate we establish the existence of a sequential majority voting equilibrium and show that the means testing rate increases with the size of the program but the fraction and the identity of the households receiving the transfers are independent of the program size furthermore the set of subsidy recipients does not depend on households preferences but depends only on income heterogeneity

mobility and redistribution the ability of individuals to move freely from one jurisdiction to another is generally seen as a constraint on the amount of redistribution that each jurisdiction within a system of governments can undertake in this paper we look at this proposition by developing a positive analysis of income redistribution by local governments in a federal system we ask how much redistribution occurs when only local governments can have tax transfer instruments individuals can move freely among jurisdictions and voters in each jurisdiction are fully aware of the migration effects of redistributive policies local redistribution is shown to induce sorting of the population with the poorest households located in the communities that provide the most redistribution while the threat of out migration affects the potential for redistribution our results suggest that significant local redistribution is nonetheless feasible numerical computations indicate that the proportion of residents who are renters is a major factor affecting the local choice of level of redistribution

progressive taxes and top income shares a historical perspective on pre and post tax income concentration in switzerland the literature on income concentration largely focuses on pre tax income the current study provides new data concerning both pre and post tax top income shares in switzerland from the 1945 2012 period redistribution due to progressive income taxes increased until the 1970s and since then the highest income households have avoided increased cantonal income taxes by taking residence in low tax cantons lower level top income groups are less mobile than the highest level groups but have benefited from tax policy reforms since the 1980s nonetheless despite fiscal federalism redistribution and post tax income concentration have been exceptionally stable in switzerland

determinants of local school spending some consistent estimates the traditional median voter model predicts that median income and taxprice are the primary determinants of local school spending levels it further implies that lump sum grants wills be utilized like private income and thus income and grant coefficients should be the same our comprehensive search technique shows that excluding equalized assessed value these predictions hold up quite well over 2048 specifications income and taxprice elasticities are reasonable and tightly distributed with income and blockgrant effects of the same general size as note above any hint of flypaper effect is completely dependent on the inclusion of equalized assessed value in the regression equation since the state of new york has annual district level tax levy elections it would be hard to rationalize bureaucratic power or agenda control as capable of producing flypaper type effects so this absence is not surprising future research should 1 investigate the specification sensitivity of flypaper effects with other datasets and wealth variables and 2 examine election and tax rules for the possibility of budget maximizing actions by school officials finally the consistently positive effects of private schooling nonwhite and in poverty suggest that future work should attempt to model non linear income effects

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

ends against the middle determining public service provision when there are private alternatives abstract public provision of a service coexists with private market provision the quality of public provision is determined by majority vote preferences are not single peaked owing to the presence of private alternatives we identify two cases in one majority voting equilibrium always exists and the median income voter is pivotal in the other a necessary condition for equilibrium indentifies the pivotal voter who must have income below the median when equilibrium exists a coalition of middle income households who consume the public alternative will be opposed by a coalition of rich and poor households with the rich choosing private consumption

the effect of marginal tax rates on taxable income a panel study of the 1986 tax reform act this paper uses a treasury department panel of more than 4 000 taxpayers to estimate the sensitivity of taxable income to changes in tax rates on the basis of a comparison of the tax returns of the same individual taxpayers before and after the 1986 tax reform the analysis emphasizes that the response of taxable income involves much more than a change in the traditional measures of labor supply the evidence shows an elasticity of taxable income with respect to the marginal net of tax rate that is at least one and could be substantially higher the implications for recent tax rate changes are discussed

income concentration in british india 1885 1946 we use a novel income tax data set to present evidence on the evolution of income concentration in the last 60 years of colonial rule in india these data allow us to study the evolution of income concentration at the country level as well as the location of top income earners across provinces we identify three key facts 1 the evolution of income concentration in british india was nonlinear following a u shape 2 the majority of top income earners were non europeans and 3 the geographical location of top income earners changed over time with the province of bombay gaining in importance in the early xxth century we provide an interpretation of these results in the light of the economic and political changes in british india over the period

should i stay or should i go exit options within mixed systems of public and private health care finance abstract mixed public private finance is widespread in health care systems internationally in one variant of mixed finance some countries e g germany allow eligible beneficiaries to fully exit from the public social insurance system and purchase private insurance using a controlled laboratory experiment we empirically investigate the predictions of a political economy model of mixed systems of public and private finance with two types of exit universal exit when all individuals can choose to exit the public system and conditional exit when only individuals with an income at or above a threshold income level can choose to exit we find that high income individuals are less likely to exit under universal exit than under conditional exit despite having the same incentive to exit in both treatments sensitivity treatments suggests that a number of factors may be at play in explaining this result including learning effects a priming effect and a framing effect but that other regarding preferences do not appear to be an important factor

democracy war and wealth lessons from two centuries of inheritance taxation in this article we use an original data set to provide the first empirical analysis of the political economy of inherited wealth taxation that covers a significant number of countries and a long time frame 1816 2000 our goal is to understand why if inheritance taxes are often very old taxes the implementation of inheritance tax rates significant enough to affect wealth inequality is a much more recent phenomenon we hypothesize alternatively that significant taxation of inherited wealth depended on 1 the extension of the suffrage and 2 political conditions created by mass mobilization for war using a difference in differences framework for identification we find little evidence for the suffrage hypothesis but very strong evidence for the mass mobilization hypothesis our study has implications for understanding the evolution of wealth inequality and the political conditions under which countries are likely to implement policies that significantly redistribute wealth and income

top incomes in the long run of history a recent literature has constructed top income shares time series over the long run for more than twenty countries using income tax statistics top incomes represent a small share of the population but a very significant share of total income and total taxes paid hence aggregate economic growth per capita and gini inequality indexes are sensitive to excluding or including top incomes we discuss the estimation methods and issues that arise when constructing top income share series including income definition and comparability over time and across countries tax avoidance and tax evasion we provide a summary of the key empirical findings most countries experience a dramatic drop in top income shares in the first part of the twentieth century in general due to shocks to top capital incomes during the wars and depression shocks top income shares do not recover in the immediate postwar decades however over the last thirty years top income shares have increased substantially in english speaking countries and in india and china but not in continental european countries or japan this increase is due in part to an unprecedented surge in top wage incomes as a result wage income comprises a larger fraction of top incomes than in the past finally we discuss the theoretical and empirical models that have been proposed to account for the facts and the main questions that remain open

the evolution of income concentration in japan 1886 2005 evidence from income tax statistics abstract this paper studies the evolution of income concentration in japan from 1886 to 2005 by constructing long run series of top income shares and top wage income shares using income tax statistics we find that i income concentration was extremely high throughout the pre wwii period during which the nation underwent rapid industrialization ii a drastic de concentration of income at the top took place in 1938 1945 iii income concentration remained low during the rest of the century but shows some sign of increase in the last decade and iv top income composition in japan has shifted dramatically from capital income to employment income over the course of the twentieth century we attribute the precipitous fall in income concentration during wwii primarily to the collapse of capital income due to wartime regulations and inflation we argue that the change in the institutional structure under the occupational reforms made the one time income de concentration difficult to reverse in contrast t

the engine and the reaper industrialization and mortality in late nineteenth century japan economic development improves long run health outcomes through access to medical treatment sanitation and higher income short run impacts however may be ambiguous given disease exposure from market integration using a panel dataset of japanese vital statistics and multiple estimation methods i find that railroad network expansion is associated with a six percent increase in gross mortality rates among newly integrated regions communicable diseases accounted for most of the rail associated mortality which indicate railways behaved as transmission vectors at the same time market integration facilitated by railways corresponded with an eighteen percent increase in total capital investment nationwide over ten years

lessons for an aging society the political sustainability of social security systems what is the future of social systems in oecd countries in our view the answer belongs to the realm of politics we evaluate how political constraints shape the social security system in six countries france germany italy spain the uk and the us under population aging two main aspects of the aging process are relevant to the analysis first the increase in the dependency ratio the ratio of retirees of workers reduces the average profitability of the unfunded social security system thereby inducing the agents to reduce the size of the system by substituting their claims towards future pensions with more private savings second an aging electorate leads to larger systems since it increases the relevance of pension spending on the policy makers agenda the overall assessment from our simulations is that the political aspect dominates in all countries albeit with some differences spain the fastest aging country faces the largest increase in the social security contribution rate when labor market considerations are introduced the political effect still dominates but it is less sizeable country specific characteristics not accounted for in our simulations such as the degree of redistribution in the pension system and the existence of family ties in the society may also matter our simulations deliver a strong policy implication an increase in the effective retirement age always decreases the size of the system chosen by the voters while often increasing its generosity finally delegation of pension policy to the ec may reduce political accountability and hence help to reform the systems

inequality as a determinant of child labor abstract this paper analyzes the relationship between the phenomenon of child labor and public education under majority voting it shows that under unequal income distribution public schooling is not supported by the majority and the amount of child labor becomes enormous

to segregate or to integrate education politics and democracy how is the quality of public education affected by the presence of private schools for the rich theory and evidence suggest that the link depends crucially on the political system we develop a theory that integrates private education and fertility decisions with voting on public schooling expenditures we find that the presence of a large private education sector benefits public schools in a broad based democracy where politicians are responsive to low income families but crowds out public education spending in a society that is politically dominated by the rich the main predictions of the theory are consistent with state level data and micro data from the u s as well as cross country evidence from the programme for international student assessment study

a tale of two unions divergent platforms and their constituencies the median voter theorem has regularly been used in economics to represent the behaviour of teachers unions little empirical work however tests whether this framework is a good fit for teachers

income risk macroeconomic and demographic change and economic inequality in japan abstract using an olg model with heterogeneous households we investigate the relationship among income risk macroeconomic and demographic changes and economic inequality between 1980 and 2000 in japan by decomposing the primary factors in earnings and consumption inequality into macroeconomic variables and the demographic variable we find that our model replicates the evolution of economic inequality in japan by performing counterfactual simulations we demonstrate that two factors changes in time varying macroeconomic factors and the unexpected decline in the total factor productivity growth rate played important roles in the increase in earnings and consumption inequality in the 1990s

on allocative distortions in problems of self selection this article considers the general structure of self selection models by imposing conditions which permit the ordering of agents by their preferences we provide a characterization of the distortions inherent in the sorting process

majority rule and the public provision of a private good this paper extends the literature on the socialization of commodities by developing a model of voting over the public provision of a private good health care

public provision of private goods government may provide a good that can if legally permitted be supplemented by private purchases policy is determined by majority rule under standard assumptions on preferences a majority voting equilibrium exists a regime of positive government provision with no restriction on private supplements is shown to be majority preferred to a regime of either only market provision or only government provision combined public and private expenditure on the good is higher under this dual provision regime than under either of the alternatives under some preference configurations the median income voter is pivotal under others a voter with income below the median is pivotal

does unconventional monetary policy affect inequality evidence from japan inequality has been largely ignored in the literature and practice of monetary policy but is gaining more attention recently here we exclusively focus on the impact of unconventional monetary policy ump on inequality we look at how the recent ump in japan affected inequality using household survey data our vector auto regression var results show that ump widened income inequality after 2008q3 as the bank of japan boj resumed its zero interest rate policy and reinstated ump this is largely due to the portfolio channel to the best of our knowledge this is the first study to empirically analyse the distributional impact of ump japan s extensive experience with ump may hold important policy implications for other countries

the conscription of wealth mass warfare and the demand for progressive taxation the dominant narrative of the politics of redistribution in political sci ence and economics highlights the signature role of the rise of electoral democracy and the development of political parties that mobilize working class groups we argue in this article that this narrative ignores the critical role played by mass warfare in the development of redistributive public policies focusing attention on the determi nants of progressive taxation we argue that mobilization for mass warfare led to demands for increased taxation of the wealthy to more fairly distribute the burden for the war effort we then show empirically that during the past century mass mobi lization for war has been associated with a notable increase in tax progressivity in the absence of war neither the establishment of universal suffrage nor the arrival of political control by parties of the left is systematically associated with large increases in tax progressivity in making these arguments we devote particular attention to a difference in differences comparison of participants and nonparticipants in world war i those who have made fortunes out of the war must pay for the war and labour will insist upon heavily graduated direct taxation with a raising of the exemption limit that is what labour means by the conscription of wealth

the political economics of not paying taxes this paper considers redistributive as well as political consequences of tax avoidance when tax avoidance is possible the official tax rate does not necessarily correspond to what individuals actually pay this affects both redistributive outcomes as well as political attitudes towards taxation depending on the avoidance technology different political equilibria emerge when the avoidance possibilities are limited the classical conflict between rich and poor is sustained if the tax avoidance technology is more effective however the equilibrium outcome can change to a situation where a coalition of poor and the very richest favor a higher tax rate comparing the model predictions with data on income inequality and evidence of avoidance activity it comes surprisingly close to actual observations

instability and concentration in the distribution of wealth abstract we consider a setup in which infinitely lived households face idiosyncratic investment risk and show that in this case the equilibrium distribution of wealth becomes increasingly right skewed over time until wealth concentrates entirely at the top the households in our setup are identical in terms of their patience and their abilities and we assume that there are no redistributive mechanisms neither explicit in the form of government tax or fiscal policies nor implicit in the form of limited intergenerational transfers our results demonstrate that the presence of such redistributive mechanisms alone ensures the stability of the distribution of wealth over time

the intergenerational conflict over the provision of public education abstract we study the intergenerational conflict over the provision of public education this conflict arises because older households without children have weaker incentives to support the provision of high quality educational services in a community than younger households with school age children we develop an overlapping generations model for households in a system of multiple jurisdictions this model captures the differences in preferred policies over the life cycle we show that the observed inequality in educational policies across communities is not only the outcome of stratification by income but is also determined by the stratification by age and a political process that is dominated by older voters in many urban communities with low quality of educational services the mobility of older households creates a positive fiscal externality since it creates a larger tax base per student this positive tax externality can dominate the negative effects that arise because older households tend to vote for lower educational expenditures as a consequence sorting by age can reduce the inequality in educational outcomes that is driven by income sorting

sorting and long run inequality many social commentators have raised concerns over the possibility that increased sorting in society may lead to greater inequality to investigate this we construct a dynamic model of intergenerational education acquisition fertility and marital sorting and parameterize the steady state to match several basic empirical endings we end that increased sorting will signiecantly increase income inequality four factors are important to our endings a negative correlation between fertility and education a decreasing marginal effect of parental education on children s years of education wages that are sensitive to the relative supply of skilled workers and borrowing constraints that affect educational attainment for some low income households

interregional redistribution and mobility in federations a positive approach the paper studies the effects and the determinants of interregional redistribution in a model of residential and political choice we find that paradoxical consequences of inter jurisdictional transfers arise if people are mobile while self sufficient regions are nec essarily identical with respect to policies and average incomes in our model interregional redistribution always leads to the divergence of regional policies and per capita incomes thus interregional redistribution prevents interregional equality at the same time however transfers may allow for more interpersonal equality among the inhabitants of each region the voting population may therefore in a decision over the fiscal constitution deliberately implement such a transfer scheme to foster regional divergence empirical evidence from panel data from oecd countries and candian provinces is consistent with the theory

a re examination of the use of ability to pay taxes by local governments abstract the orthodox view of local finance in the u s is that local governments should abstain from using ability to pay taxes because migration would result in a misallocation of resources and would nullify any attempt to redistribute income this paper uses a general equilibrium model of a metropolitan area to examine the efficiency and redistributive properties of local income taxation relative to local head taxes contrary to the orthodox assertion the results indicate that local governments can use income taxation without substantially misallocating resources in addition some redistribution results from the use of local income taxes