Why do tax rates vary so much across countries? We study the role of altruism and ethnic fragmentation in redistribution. The government of a two-party democracy is elected by altruistic voters and decides on a redistributive income tax. Social identification directs voters' altruism toward...

In the present paper we uncover a novel mechanism through which a minority can gain a disproportionate power in a perfectly functioning democracy. In our model, a government elected by majority within a two party democracy, decides on a unique redistributive instrument, the tax rate. We show...