Andrea Gallice (Universita’ di Torino e Collegio Carlo Alberto)

“Economic and Class Voting in a Model of Redistribution with Social Concerns”

abstract

We investigate how concerns about social status may affect individuals’ preferences for redistribution. In our model, agents are heterogeneous across two dimensions, productivity and social class, and an individual’s social status is defined as his relative standing in terms of a weighted average of these two components. The weight on each component depends positively on its standard deviation. Redistribution thus simultaneously affects labor supply and the weights that determine social status. As such, taxation not only redistributes resources from the rich to the poor but also becomes a way of preserving or modifying social status. Thus, individuals who have the same productivity but belong to different social classes support different tax rates. We characterize the equilibrium of the political game as the solution of a system of non-linear equations and identify the interclass coalition of voters who support the equilibrium tax rate.