Report

Amongst the literature read by me, were the following

-Inequality and Growth: the Role of Beliefs and Culture M.Strieborny, 2013

This work is, to a large extent, an analysis of previously mentioned paper of Alesina and Angeleatos
(2005). The author discusses the effects of an exogenous positive change in preference for fairness, e.g.
when for some outside reason people become more concerned with general inequality in the society,
on the optimal level of taxes in the model that was proposed by Alesina and Angeleatos. He
demonstrates that, in the corner case, when all income is attributed to luck, the increase in the
preferences for fairness results in increase in optimal level of taxation, while if all income is attributed to
effort and investment, the sign of effect is actually ambiguous. Author than discusses some empirical
data, that suggests that government intervention in ‘’egalitarian’’ countries, ceteris paribus, has more
pronounced negative impact on economic growth and more positive impact on equality, than in
‘’laissez-faire’’ countries. (Those two terms describe the attitude of population towards how income is
earned, e.g. to what extent it is actually attributed to luck)

-Ideology and the Growth of Government A.Pickering, J.Rockey, 2007

This paper represents an empirical research on how left (advocating for more redistribution) and right
(more pro-market) ideology. For the study, the authors introduce a utility function, that, which has a
logarithmic form for reasons not to dissimilar to those I described in previous letter. Utility is dependent,
on the disposable income, and on amount spent by government on redistribution. Sensitivity to the
latter increases with drift of the indual ideology to the left. Authors come to conclusion that leftist or
rightist leanings of the society produce the more different outcomes in terms of tax rate selected, the
higher is the income of the median voter, e.g. at lower income the selected tax rates in leftist and
rightist countries are expected to be not too dissimilar.

I am currently reading ‘’Capitalism and Economic Growth: a Game Theoretic Perspective’’ (C.K. Leong,
2008) and ‘’The Debt Tax Shield, Economic Growth and Inequality’’ (M.Fischer,B.Jensen,2017)