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The Dynamics of Social Identity, Inequality and Redistribution

Author

Listed:
  • Ghiglino, Christian
  • Müller, Andreas

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, Christian & Müller, Andreas, 2023. "The Dynamics of Social Identity, Inequality and Redistribution," CEPR Discussion Papers 18638, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18638
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    More about this item

    Keywords

    Social identity; Tax rate; Redistribution; Inequality; Ethnicity; Social class; Probabilistic voting;
    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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