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Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
Tax policy design in the presence of social preferences: some experimental evidence
Lucy F. Ackert
Jorge Martinez-Vazquez
Mark Rider
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.


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Lucy F. Ackert & Jorge Martinez-Vazquez & Mark Rider, Tax policy design in the presence of social preferences: some experimental evidence, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2004-33, 2004.
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