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Tax competition and income inequality : why did the welfare state survive?
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Plümper, Thomas and Troeger, Vera (2012) Tax competition and income inequality : why did the welfare state survive? Working Paper. Coventry, UK: Department of Economics, University of Warwick. CAGE Online Working Paper Series, Volume 2012 (Number 83).
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Text (Working paper)
WRAP_83.2012_troeger.pdf - Published Version Download (447Kb) | Preview |
Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
Contrary to the belief of many, tax competition did not undermine the foundations of the
welfare state and did not even abolish the taxation of capital. Instead, tax competition caused
governments to shift the tax burden from capital to labor, thereby increasing income
inequality in liberal market economies that traditionally redistribute income by relatively high
effective capital taxes and relatively low effective labor taxes. In contrast, income inequality
did increase little or not at all in social welfare states that dominantly use social security
transfers to redistribute income. Governments in social welfare states found it easy to
maintain high social expenditures because they increasingly taxed labor, which is relatively
immobile, to finance social security transfers. We test the predictions of this theory using a
simultaneous equation approach that accounts for the endogeneity of tax policies, fiscal
policies, and deficits.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HJ Public Finance |
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Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Public welfare , Public welfare -- Finance, Tax incidence , Taxation -- Econometric models | ||||
Series Name: | CAGE Online Working Paper Series | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry, UK | ||||
Official Date: | March 2012 | ||||
Dates: |
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Volume: | Volume 2012 | ||||
Number: | Number 83 | ||||
Number of Pages: | 44 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) | ||||
Date of first compliant deposit: | 1 August 2016 | ||||
Date of first compliant Open Access: | 1 August 2016 |
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