Modelling the composition of government expenditure in democracies
This paper considers majority voting over the ratio of transfer payments to per capita expenditure on public goods. A model is constructed in which individuals vote for government expenditure on a public good, for a given income tax rate. Labour supply is endogenous. The equilibrium ratio of transfers to public good expenditure is a function of the ratio of median to mean wages and the tax rate. Cross-sectional regressions confirmed that reductions in the skewness of the wage rate distribution are associated with reductions in transfer payments relative to public goods expenditure, at a decreasing rate. Increases in the tax rate initially increase the importance of transfer payments but eventually tax rate increases lead to lower transfers.
Year of publication: |
2009
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Authors: | Creedy, John ; Moslehi, Solmaz |
Published in: |
European Journal of Political Economy. - Elsevier, ISSN 0176-2680. - Vol. 25.2009, 1, p. 42-55
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Publisher: |
Elsevier |
Keywords: | Median voter Public goods Transfer payment |
Saved in:
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