On redistribution effects of public debt amongst single-minded generations

Canegrati, Emanuele (2007): On redistribution effects of public debt amongst single-minded generations.

Abstract

In this paper I will introduce a new political economy model, where there exists a competition amongst two political candidates, which aim to set a policy which enables them to win elections, max- imising the probability of winning. I will show that, if taxes neces- sary to repay the debt are not lump sum but proportional to income, we have dramatic distorting effect on the labour supply. The prob- lem is exacerbate once we take into account that the Government set taxes in order to favour the most in‡uencing social group. As a consequence, effective marginal tax rates are differentiated amongst social groups and thus the burden of public debt is not equally borne.

• Item Type: MPRA Paper
• Institution: Catholic university of sacred heart
• Language: English
• Keywords: public debt; single-mindedness; intergenerational redistribution
• Subjects: J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J20 - General; H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt ; Debt Management ; Sovereign Debt; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D78 - Positive Analysis of Policy Formulation and Implementation; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; J - Labor and Demographic Economics > J1 - Demographic Economics > J14 - Economics of the Elderly ; Economics of the Handicapped ; Non-Labor Market Discrimination; D - Microeconomics > D6 - Welfare Economics > D64 - Altruism ; Philanthropy; H - Public Economics > H6 - National Budget, Deficit, and Debt > H60 - General; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice ; Clubs ; Committees ; Associations; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

References

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