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학술대회자료

The influence of income inequality aversion on redistribution in a democratic context

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Post-war declines in income inequality have reversed sharply since the 1970s. Democracy’s role in mediating this trend remains controversial, with ambiguity in the empirical findings. In contrast, experiments have shown clearer aversion toward inequality. This paper examines one mechanism that could account in part for this failure of democracy to mitigate income inequality despite a widespread popular preference against it. We investigate redistribution among other-regarding worker-voters who hold non-material as well as material concerns. Workers can adjust their working hours to reduce inequality after voting on a flat tax rate to fund redistribution. Our stylized example shows that as the income distribution skews to the right, a lower tax rate can be more preferred if the degree of inequality aversion goes beyond a certain level. This derives from workers adjusting their working hours in consideration of income inequality and decrease in efficiency of an economy, which is strengthened by a right-skewed skill distribution. Keywords: inequality aversion, redistribution game, tax, efficiency, labor supplied, income share

1. Introduction

2. Model

3. Workers’ Behavior

4. Voters’ Behavior

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