Journal Article

Income inequality, redistribution and the position of the decisive voter

van der Linde, Daan, Groot, Loek

2016

Overview

A large literature explaining patterns of redistribution makes use of the median voter theorem. Using a novel approach, this contribution shows that in OECD countries the decisive voter, determined by the earner who sees her preferred tax rate being implemented, on average sits around the 50 th percentile in the income distribution, although significant within and between country differences exist. Under the assumption of a lognormal distribution of gross income, we derive the required tax rate to align the observed gross and net Gini coefficients in OECD countries. This estimated tax rate is compared to the tax rate preferred by the median income earner, which gives a new index capturing a nation’s deviation from the median voter position, measured as the difference between the estimated percentile position of the decisive voter and the 50 th percentile position of the median voter. We provide a comparative overview of this index over time and between countries. We also locate the positions of alternative versions of the decisive voter, among which following the ‘one dollar, one vote’ rule, in a Lorenz curve diagram.

• Publisher: Springer US,Springer Nature B.V
• Subject: Development Economics / Economic Growth / Economics / Economics and Finance / Estimated taxes / GDP / Gross Domestic Product / Gross income / Income distribution / Income inequality / International Economics / Labor supply / Lorenz Curve / Lump sum / Net income / Parameter estimation / Per capita / Political Science / Public Finance / Tax rates / Taxation / Voter behavior / Voters