This paper examines the choice between government expenditure on public goods and transfer payments, in the form of a pension, in an overlapping-generations model. Government expenditure is tax-financed on a pay-as-you-go basis. A utilitarian judge chooses expenditures to maximize a social...

This paper examines the question of why the composition of government expenditure differs among democratic countries and to what extent it may be explained by differences in economic conditions or preferences. A simple overlapping generations model, which allows for a range of relevant factors,...