DP7997 Social mobility and redistributive taxation

Author(s): Kai A. Konrad, Florian Morath
Publication Date: September 2010
Keyword(s): Median voter, Redistribution, Social mobility
JEL(s): D72, D78, H20
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7997

We investigate redistributive taxation in a political economy experiment and determine how different patterns of social mobility affect the choices of redistributional taxes. In the absence of social mobility, voters choose tax rates that are very well in line with the prediction derived in the standard framework by Meltzer and Richard (1981). However, past or future changes in the income hierarchy affect the choice of the tax rate in the current period. The same is true for social mobility within the period to which the tax rate choice applies and for the case where the choice of the tax rate takes place behind the veil of ignorance. Due to our design of the experiment, these strong effects of own social mobility cannot be attributed to social or other-regarding preferences.