Econometrica: Jul 1977, Volume 45, Issue 5

Power and Taxes<1137:PAT>2.0.CO;2-W
p. 1137-1161

Mordecai Kurz, Robert J. Aumann

A treatment of taxation based on considerations of political and economic power in a majority-vote democratic context is the topic of this article. Agents are endowed with gross incomes and have concave von Neumann-Morgenstern utilities for money. Taxation policies are decided by majority vote, but each citizen retains a certain basic right that prevents the majority from arbitrarily expropriating his income. The resulting non-transferable utility cooperative game is analyzed by means of the Harsanyi-Shapley-Nash value.

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