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Public Choice

, Volume 119, Issue 3–4, pp 335–358 | Cite as

Taxes, Budgetary Rule and Majority Voting

  • Helmuth Cremer
  • Philippe De Donder
  • Firouz Gahvari
Article

Abstract

This paper studies majority voting outcomes fora specific class of two-dimensional policies. One policyinstrument influences efficiency and the other redistribution.Absent the political process, the two dimensions can beaddressed separately. With a two dimensional vote, the twoaspects will interact in a non-trivial way. The illustrativepolicy we consider, requires taxing an externality-generatinggood and determining a budgetary rule which specifies theproportions of the tax proceeds that go to wage earners and tocapital owners. We show: First, a sequential vote wherein thetax rate is determined first and the budgetary rule second,always possesses an equilibrium and that this equilibrium isthe median-endowed individual's most-preferred policy. Second,the reverse sequential choice implies that the median-endowedindividual may, but need not, be decisive. Third, the``Shepsle procedure'' also implies that the equilibrium is thepolicy most favored by the median individual. Fourth, thisequilibrium constitutes, under certain circumstances, theCondorcet winner for the unrestricted simultaneous votinggame.

Keywords

Public Finance Specific Class Majority Vote Political Process Wage Earner 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

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Copyright information

© Kluwer Academic Publishers 2004

Authors and Affiliations

  • Helmuth Cremer
    • 1
  • Philippe De Donder
    • 1
  • Firouz Gahvari
    • 2
  1. 1.IDEI and GREMAQUniversity of ToulouseToulouseFrance
  2. 2.Department of EconomicsUniversity of Illinois at Urbana-ChampaignUrbanaU.S.A.

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