To get Rich is Glorious, but only if Fairly

Cozzi, Guido and Mantovan, Noemi (2021): To get Rich is Glorious, but only if Fairly.

Abstract

The United States witnessed an increase in pre-tax inequality, a rise in the wealth-to-income ratio, and an extraordinary rise in top income inequality in the last four decades. However, income and wealth tax rates did not increase. To explain this, we build a political economy model in which people care about fairness and approve of getting rich due to creating value rather than extracting value from others. Simulations and calibrations show that rational voters can allow for low levels of redistribution even as they observe a sharp increase in inequality.

• Item Type: MPRA Paper
• Language: English
• Keywords: Political Economy; Fairness; Redistribution; Globalization
• Subjects: H - Public Economics > H0 - General; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity

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