Borissov, Kirill and Surkov, Alexander (2010): Endogenous growth in a model with heterogeneous agents and voting on public goods.
Download (287kB) | Preview
We consider a Barro-type endogenous growth model in which the government’s purchases of goods and services enter into the production function. The provision of government services is financed by flat-rate (linear) income or lump-sum taxes. It is assumed that individuals differing in their discount factors vote on the tax rates. We propose a concept of voting equilibrium leading to some versions of the median voter theorem for steady-state equilibria, fully characterize steady-state equilibria and show that if the median voter discount factor is sufficiently low, the long-run rate of growth in the case of flat-rate income taxation is higher than that in the case of lump-sum taxation.
|Item Type:||MPRA Paper|
|Original Title:||Endogenous growth in a model with heterogeneous agents and voting on public goods|
|Keywords:||economic growth, voting, proportional, flat-rate, linear tax, lump-sum tax, heterogeneous agents, endogenous growth|
|Subjects:||E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation
H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H31 - Household
H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods
D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving
D - Microeconomics > D7 - Analysis of Collective Decision-Making > D72 - Political Processes: Rent-Seeking, Lobbying, Elections, Legislatures, and Voting Behavior
O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity
|Depositing User:||Alexander Surkov|
|Date Deposited:||20. Dec 2010 02:21|
|Last Modified:||26. Feb 2015 07:43|
Alesina, A. and Rodrik, D., 1994. Distributive politics and economic growth, The Quarterly Journal of Economics, 465–490.
Azzimonti, d.F., M., E., and Krusell, P., 2008. Production subsidies and redistribution, Journal of Economic Theory, 142, 73–99.
Baron, D.P., 1996. A dynamic theory of collective goods programs, American Political Science Review, 90, 316–330.
Barro, R.J., 1990. Government spending in a simple model of endogeneous growth, Journal of political economy, 98 (S5), 103–125.
Bassetto, M. and Benhabib, J., 2006. Redistribution, taxes, and the median voter, Review of Economic Dynamics, 9, 211–223.
Becker, R.A., 1980. On the long-run steady state in a simple dynamic model of equilibrium with heterogeneous households, The Quarterly Journal of Economics, 95, 375–382.
Becker, R.A., 2006. Equilibrium dynamics with many agents, in: T.M. Rose-Anne Dana, Cuong Le Van and K. Nishimura, eds., Handbook on Optimal Growth 1. Discrete Time, Springer Berlin Heidelberg, 385–442.
Bergstrom, T.C., 1979. When does majority rule supply public goods eciently?, Scandinavian Journal of Economics, 81, 216–226.
Bernheim, B. and Slavov, S., 2009. A solution concept for majority rule in dynamic settings, Review of Economic Studies, 76 (1), 33–62.
Borissov, K., Brechet, T., and Lambrecht, S., 2010. Median voter environmental maintenance, CORE Discussion Paper.
Bowen, H., 1943. The interpretation of voting in the allocation of resources, Quarterly Journal of Economics, 58, 27–48.
Cooley, T.F. and Soares, J., 1999. A positive theory of social security based on reputation, Journal of Political Economy, 107, 135–160.
Corbae, D.P., D. and Kuruscu, B., 2009. Politico-economic consequences of rising wage inequality, Journal of Monetary Economics, 56, 43–61.
Fiaschi, D., 1999. Growth and inequality in an endogenous fiscal policy model with taxes on labor and capital, European Journal of Political Economy, 15 (4), 727–746.
Grossmann, V., 2003. Income inequality, voting over the size of public consumption, and growth, European Journal of Political Economy, 19, 265–287.
Kramer, G.H., 1972. Sophisticated voting over multidimensional choice spaces, Journal of Mathematical Sociology, 2, 165–180.
Krusell, P., Quadrini, V., and Rios-Rull, J.V., 1997. Politico-economic equilibrium and economic growth, Journal of Economic Dynamics and Control, 21, 243–272.
Krusell, P. and Rios-Rull, J.V., 1999. On the size of the u.s. government: Political economy in the neoclassical growth model, American Economic Review, 89, 1156–81.
Meltzer, A.H. and Richard, S.F., 1981. A rational theory of the size of government, The Journal of Political Economy, 89 (5), 914–927.
Rangel, A., 2003. Forward and backward intergenerational goods: Why is social security good for the environment?, American Economic Review, 93, 813–834.
Sarte, P.D.G., 1997. Progressive taxation and income inequality in dynamic competitive equilibrium, Journal of Public Economics, 66, 145–171.
Shepsle, K.A., 1979. Institutional arrangements and equilibrium in multidimensional voting models, American Journal of Political Science, 23 (1), 27–59.
Sorger, G., 2002. On the long-run distribution of capital in the ramsey model, Journal of Economic Theory, 105, 226–243.