Median-Voter Equilibria in the Neoclassical Growth Model under Aggregation

20 Pages Posted: 3 Jan 2007

See all articles by Marina Azzimonti

Marina Azzimonti

SUNY Stony Brook - Department of Economics; National Bureau of Economic Research (NBER)

Eva de Francisco

CUNY Lehman College

Per Krusell

Princeton University - Department of Economics; Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR)

Abstract

We study a dynamic version of Meltzer and Richard's median-voter model where agents differ in wealth. Taxes are proportional to income and are redistributed as equal lump-sum transfers. Voting occurs every period and each consumer votes for the tax that maximizes his welfare. We characterize time-consistent Markov-perfect equilibria twofold. First, restricting utility classes, we show that the economy's aggregate state is mean and median wealth. Second, we derive the median-voter's first-order condition interpreting it as a tradeoff between distortions and net wealth transfers. Our method for solving the steady state relies on a polynomial expansion around the steady state.

Suggested Citation

Azzimonti, Marina and de Francisco, Eva and Krusell, Per L., Median-Voter Equilibria in the Neoclassical Growth Model under Aggregation. Scandinavian Journal of Economics, Vol. 108, No. 4, pp. 587-606, December 2006, Available at SSRN: https://ssrn.com/abstract=954850 or http://dx.doi.org/10.1111/j.1467-9442.2006.00472.x

Marina Azzimonti (Contact Author)

SUNY Stony Brook - Department of Economics ( email )

NY 11733-4384
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eva De Francisco

CUNY Lehman College ( email )

Per L. Krusell

Princeton University - Department of Economics ( email )

111 Fisher Hall
Princeton, NJ
United States
609-258-4003 (Phone)
609-258-6419 (Fax)

HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 0 8 16 30 73 (Phone)
+46 0 8 16 41 77 (Fax)

HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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