Redistributing income under proportional representation

Although majoritarian decision rules are the norm in legislatures, relative ly few democracies use simple majority rule at the electoral stage, adoptin g instead some form of multiparty proportional representation. Moreover, ag gregate data suggest that average income tax rates are higher, and distribu tions of posttax income flatter, in countries with proportional representat ion than in those with majority rule. While there are other differences bet ween these countries, this paper explores how variations in the political s ystem per se influence equilibrium redistributive tax rates and income dist ributions. A three-party proportional representation model is developed in which taxes are determined through legislative bargaining among successful electoral parties, and the economic decision for individuals is occupationa l choice. Political-economic equilibria for this model and for a two-party, winner-take-all, majoritarian system are derived and compared.