A Rational Explanation for the Redistribution Paradox. Theory and Empirical Evidence

Bibliographic Data

ID10493370
AuthorsRoberto Antonietti (0000-0002-2172-4062, University of Padua, corresponding author), Francesco Farina (0000-0002-6300-4506, University of Siena), Fulvio Fontini (0000-0002-7446-1585, University of Padua)
Year2016
Volume63
Issue5
Pages539-555
Publication date2016-06-29
Open AccessYes
TypeARTICLE
VenueScottish Journal of Political Economy (JOURNAL)
Journal identifiersISSN: 0036-9292 • E-ISSN: 1467-9485
PublisherWiley (PUBLISHER • GB)
DOI10.1111/sjpe.12118
OpenAlexW2465732919
LanguageEN
References cited17

The paper provides a rational explanation for the redistribution paradox, whereby low‐income individuals seeking more social security prefer a lower taxation although this might imply a reduced welfare. A simple model of tax transfer and redistribution is presented, with various agents facing two different unemployment probabilities. We investigate how the preferred tax rate changes with the probability of being unemployed. We show that, when the probability of unemployment for the less‐skilled correlates negatively with that of the highly skilled, the relationship with the tax rate is not monotonic and depends on the level of risk aversion. This theoretical framework is confirmed in an empirical investigation based on microeconomic data, and in a robustness test based on macroeconomic data

Econometrics · Economics · Empirical evidence · Macroeconomics · Microeconomics · Monotonic function · Redistribution (election · Robustness (evolution · Social security · Tax rate · Unemployment · Welfare · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Taxation and Compliance Studies

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