A Politico-Economic Model of Public Expenditure and Income Taxation

Laura Mayoral and Joan Esteban ()

No 743, Working Papers from Barcelona School of Economics

Abstract: We model the political process as consisting of voting on the issue considered salient, public expenditure, with a subsequent consensus over size of government and income taxation. We prove that for each majoritarian choice there is a unique consensus policy on progressivity and government size. We empirically validate the implication that the sign of the relationship between inequality and progressivity chosen by the median voter is conditional on the degree of substitutability between government and market supplied goods. We also obtain that this substitutability has a negative impact on the negative marginal effect of inequality on the size of government.

Keywords: government policy; income taxation; public expenditure (search for similar items in EconPapers)
JEL-codes: H23 H50 O50 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-cdm, nep-pbe, nep-pol and nep-pub
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Journal Article: A politico-economic model of public expenditure and income taxation (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:743

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