Traditional political economy models of taxation fail to explain why there is so little redistribution of wealth despite significant wealth inequalites. This is for two reasons: (1) The median voter approach cannot deal with a multidimensional policy-space and (2) wealth taxation affects...

The effects of different institutional arrangements for the central bank are examined in the presence of economic shocks and uncertainty about the central banker's and the medianvoter's inflation target. A contract which is based on self-imposed monetary target announcements proves to be...