On existence of pure-strategy equilibrium with endogenous income

Description

It is well known that in a voting-over-income-taxation game, no pure-strategy equilibrium exists when voters’ incomes are exogenous—that is, when individuals make only consumption choices. I show that in an environment with endogenous income—where individuals make labor–leisure decisions in addition to consumption choices—and where candidates propose marginally progressive taxes, a pure-strategy equilibrium tax schedule can exist.

Publication Date

1-1-2012

Keywords

Taxation, Income, Endogenous income

Conference

IGIDR, 26th September, 2012, Mumbai

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