Equilibrium Tax Rates under Ex-ante Heterogeneity and Income-dependent Voting

The standard models with incomplete markets (e.g. Aiyagari) have difficulty justifying the current income tax rates as an optimal or political equilibrium outcome. Given the highly skewed income distribution, the majority of the population would be in favor of raising taxes to a much higher level. We show that incorporating (i) the ex-ante heterogeneity of earnings and (ii) income-dependent voting behavior helps us to reconcile the large gap between the model and data.

Vote Choice of Indian Voters: Guided or Independent?

The article probes the independence of vote choice among Indian voters during national elections. Analyzing Lokniti’s election survey data it highlights that even as a majority of voters take an independent call on who they are going to vote for, there is still a significant proportion that votes according to someone else’s advice. While this counsel has always come from a family member mostly, voters are increasingly paying attention to a community leaders’ opinion as well, particularly those voters who belong to marginalized and minority social groups. Dependent voting is also more prevalent among women and voters in socio-economically backward states.