Majority Voting, Progressive Taxation, and Income Inequality

Because the Soviet-Jews exodus was not foreseen ahead of time, Israel’s migration experience is amenable to the natural-experiment methodology. Disposable-income inequality in Israel, was roughly stable until the beginning of the 1990s, rose sharply following the immigration wave, even though no such change occurs with respect to the market-generated inequality. The chapter develops a stylized general equilibrium model with free migration, where wages are endogenous and redistribution policy is determined by (endogenously determined) majority voting. It address the issue of how migration can reshape the political balance of power, especially between skilled and unskilled and between native-born and migrants, and consequently to political-economic equilibrium redistribution policy of the welfare state.

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Higher Education and Progressive Taxation: Equity, Efficiency and Majority Voting

Journal of Economic Studies ◽

10.1108/01443589210021406 ◽

1992 ◽

Vol 19 (4) ◽

Cited By ~ 2

Author(s):

John Creedy ◽

Patrick Francois

Keyword(s):

Higher Education ◽

Majority Voting ◽

Progressive Taxation

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THE POLITICS OF FINANCIAL DEVELOPMENT AND CAPITAL ACCUMULATION

Macroeconomic Dynamics ◽

10.1017/s136510051600136x ◽

2017 ◽

Vol 23 (1) ◽

pp. 358-383

Author(s):

Tarishi Matsuoka ◽

Katsuyuki Naito ◽

Keigo Nishida

Keyword(s):

Income Inequality ◽

Financial Development ◽

Capital Accumulation ◽

Investment Project ◽

Credit Market ◽

Majority Voting ◽

Market Imperfections ◽

Fixed Cost ◽

Credit Market Imperfections ◽

The Government

This paper considers the political economy of financial development in an overlapping generations model that incorporates credit market imperfections, and shows that income inequality is a determinant of financial and economic development. Individuals have an opportunity to start an investment project at a fixed cost, but their income to finance the cost is unequal. The government proposes a policy financed by taxation that mitigates credit market imperfections, the implementation of which is determined through majority voting. The policy benefits middle-income individuals who can start the investment only after the implementation of the policy. The policy is, however, against the interest of the rich who wish to block such new entry, and that of the poor who wish to avoid the tax burden. Whether the policy obtains majority support depends on income inequality. High income inequality makes the policy hard to implement, which causes financial and economic underdevelopment.

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