NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The Effects of Income Mobility and Tax Persistence on Income Redistribution and Inequality

Marina Agranov, Thomas R. Palfrey

NBER Working Paper No. 22759
Issued in October 2016
NBER Program(s):Public Economics, Political Economy

We explore the effect of income mobility and the persistence of redistributive tax policy on the level of redistribution in democratic societies. An infinite-horizon theoretical model is developed, and the properties of the equilibrium tax rate and the degree of after-tax inequality are characterized. Mobility and stickiness of tax policy are both negatively related to the equilibrium tax rate. However, neither is sufficient by itself. Social mobility has no effect on equilibrium taxes if tax policy is voted on in every period, and tax persistence has no effect in the absence of social mobility. The two forces are complementary. Tax persistence leads to higher levels of post-tax inequality, for any amount of mobility. The effect of mobility on inequality is less clear-cut and depends on the degree of tax persistence. A laboratory experiment is conducted to test the main comparative static predictions of the theory, and the results are generally supportive.

download in pdf format
   (1045 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22759

Users who downloaded this paper also downloaded* these:
Alesina, Stantcheva, and Teso w23027 Intergenerational Mobility and Support for Redistribution
Battaglini and Patacchini w22739 Influencing Connected Legislators
Canen and Trebbi w22756 Endogenous Network Formation in Congress
Hershbein and Kahn w22762 Do Recessions Accelerate Routine-Biased Technological Change? Evidence from Vacancy Postings
Hanson, Scharfstein, and Sunderam w22763 Fiscal Risk and the Portfolio of Government Programs
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us