Tax Policy Design in the Presence of Social Preferences: Some Experimental Evidence
Lucy F. Ackert
Kennesaw State University - Michael J. Coles College of Business; Federal Reserve Bank of Atlanta
Georgia State University - Andrew Young School of Policy Studies
Georgia State University - Department of Economics
Andrew Young School Research Paper No. 06-03
FRB of Atlanta Working Paper No. 2004-33
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, H23working papers series
Date posted: January 4, 2006
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