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Income Redistribution and the Diversity of Consumer Goods

Author

Listed:
  • Paul Maarek

    (Université de Cergy-Pontoise, THEMA)

  • Renaud Bourlès

    (Ecole Centrale Marseille, CNRS & EHESS)

  • Michael T.Dorsch

    (Central European University)

Abstract
Reductions in the generosity of welfare benefits and less progressive taxation have decreased the redistributive impact of fiscal policy since the mid-1990’s across the advanced democracies. We argue that the strong increase in the diversity of goods observed those last decades may have modified preferences for redistribution differently across groups in society and affected the political equilibrium tax rate. We show that if the share of diversified goods compared to that of basic (necessary) goods in the consumption bundle sufficiently increases with income, relatively rich consumers could disproportionately benefit from an increase in the diversity of goods. Consequently we show in a probabilistic voting model that this could lead to a decrease in the equilibrium tax rate. We then empirically demonstrate, using fixed effect regressions over a a panel of OECD countries, that there exists a strong correlation between our proxies for the diversity of goods and our proxies for the degree of fiscal redistribution.

Suggested Citation

  • Paul Maarek & Renaud Bourlès & Michael T.Dorsch, 2014. "Income Redistribution and the Diversity of Consumer Goods," THEMA Working Papers 2014-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2014-21
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    Cited by:

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    More about this item

    Keywords

    Redistribution; Diversity of goods; Taxation; Probabilistic voting;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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