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The Dynamics of Social Identity, Inequality and Redistribution

Author

Listed:
  • Ghiglino, C.
  • Muller, A.

Abstract

We provide a politico-economic theory of income redistribution with endogenous social identity of voters. Our analysis uncovers a non-monotonic relationship between market income inequality and redistributive taxation in line with the mixed evidence on the sign of their empirical relationship: taxation first increases with wage inequality as all voters identify with others, but then drops sharply as affluent voters switch to identify in-group. We further add ethnicity as an identification attribute. Consistent with existing empirical evidence, our model predicts that the presence of ethnic minorities and across ethnic group inequality reduce redistribution, while within ethnic group wage inequality increases it.

Suggested Citation

  • Ghiglino, C. & Muller, A., 2023. "The Dynamics of Social Identity, Inequality and Redistribution," Cambridge Working Papers in Economics 2371, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:2371
    as

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    File URL: https://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2371.pdf
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    References listed on IDEAS

    as
    1. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, April.
    2. Shayo, Moses, 2009. "A Model of Social Identity with an Application to Political Economy: Nation, Class, and Redistribution," American Political Science Review, Cambridge University Press, vol. 103(2), pages 147-174, May.
    3. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inequality; Probabilistic Voting; Redistribution; Social Class; Social Identity; Tax Rate;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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