Rupert Sausgruber, Axel Sonntag, Jean-Robert Tyran
work in progress
Publication year: 2019

We experimentally study the disincentive effect of taxing work and redistributing tax revenues per capita when redistribution is imposed vs. democratically chosen in a vote. We find that the disincentive effect is significantly smaller when redistribution is chosen in a vote than when it is imposed. That is, we find an endogeneity effect in the sense that the efficiency cost is smaller when redistribution is chosen in a vote. The reason is that redistribution is seen as more legitimate, and hence less demotivating, when accepted in a vote. That is, we show there is a causal “dividend of democracy”.