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Working Paper

Majority Voting: A Quantitative Investigation

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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.
Topics
Public finance
Econometrics, modeling, and forecasting
12.31.2014ISSN 2573-7953 WP 14-42Revisions WP 14-42R, WP 14-42R2DOI 10.26509/frbc-wp-201442
Keywords political economy, essential set, voting, inequality, incomplete markets
JEL Classification Codes D52, D72, E62

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Carroll, Daniel R., Jim Dolmas, and Eric R. Young. 2014. “Majority Voting: A Quantitative Investigation.” Federal Reserve Bank of Cleveland, Working Paper No. 14-42. https://doi.org/10.26509/frbc-wp-201442