Majority Voting: A Quantitative Investigation
||Revisions: WP 14-42R|
We study the tax systems that arise in a once-and-for-all majority voting equilibrium embedded within a macroeconomic model of inequality. We find that majority voting delivers (i) a small set of outcomes, (ii) zero labor income taxation, and (iii) nearly zero transfers. We find that majority voting, contrary to the literature developed in models without idiosyncratic risk, is quite powerful at restricting outcomes; however, it also delivers predictions inconsistent with observed tax systems.
Keywords: Political Economy, Essential Set, Voting, Inequality, Incomplete Markets.
JEL Classification Numbers: D52, D72, E62
Suggested citation: Carroll, Daniel R., Jim Dolmas, and Eric. R. Young, 2015. “Majority Voting: A Quantitative Investigation,” Federal Reserve Bank of Cleveland, working paper no 14-42.