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Tax Policy Design in the Presence of Social Preferences: Some Experimental EvidenceLucy F. AckertKennesaw State University - Michael J. Coles College of Business; Federal Reserve Bank of Atlanta Jorge Martinez-VazquezGeorgia State University - Andrew Young School of Policy Studies Mark RiderGeorgia State University - Department of Economics February 2006 Andrew Young School Research Paper No. 06-03 FRB of Atlanta Working Paper No. 2004-33 Abstract: This paper reports the results of experiments designed to examine whether a taste for fairness affects people's preferred tax structure. Building on the Fehr and Schmidt (1999) model, we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing among alternative tax structures. However, concern for redistribution decreases when it leads to increasing deadweight losses. Our findings have important implications for the design of optimal tax theory.
Number of Pages in PDF File: 39 Keywords: Tax policy, social preferences, fairness JEL Classification: C92, D63, H21, H23 working papers seriesDate posted: January 4, 2006Suggested CitationContact Information
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