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Voting, Wealth Heterogeneity, and Endogenous Labor Supply

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  • Chetan Ghate

Abstract

We examine the link between voting outcomes, wealth heterogeneity, and endogenous labor - leisure choice in the majority-voting - endogenous-growth frameworks of Alesina and Rodrik (1994) and Das and Ghate (2004). We augment these frameworks to incorporate leisure-dependent utility and allow households to vote on factor-specific income taxes. When agents vote on factor-specific taxes, we show that the asymptotic convergence of factor holdings does not imply unanimity over the growth-maximizing tax policy in the steady state. Unanimity over growth-maximizing policies holds only when agents vote on a general income tax,and when agents vote on factor-specific taxes but labor is exogenous.

Suggested Citation

  • Chetan Ghate, 2007. "Voting, Wealth Heterogeneity, and Endogenous Labor Supply," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(4), pages 477-497, December.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200712)63:4_477:vwhael_2.0.tx_2-3
    DOI: 10.1628/001522107X268989
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    References listed on IDEAS

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    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-1198, December.
    2. Steve Bond & Asli Leblebicioglu & Fabio Schiantarelli, 2010. "Capital accumulation and growth: a new look at the empirical evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(7), pages 1073-1099, November/.
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    More about this item

    Keywords

    factor income taxation; endogenous distribution; median-voter theorem; heterogeneous agents; endogenous labor supply;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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