On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model

José-Víctor Ríos-Rull and Per Krusell

American Economic Review, 1999, vol. 89, issue 5, 1156-1181

Abstract: We study a dynamic version of Meltzer and Richard's median-voter model of the size of government. Taxes are proportional to total income, and they are redistributed as equal lump-sum transfers. Voting takes place periodically over time, and each consumer votes for the tax rate that maximizes his equilibrium utility. We calibrate the model to U.S. data. Key elements in the calibration are the income and wealth distribution and the parameters governing the leisure and consumption choices. The total size of transfers predicted by our political-economy model is quite close to the size of transfers in the data.

JEL-codes: H11 O41 P16 (search for similar items in EconPapers)
Date: 1999
Note: DOI: 10.1257/aer.89.5.1156
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Citations: View citations in EconPapers (133)

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Working Paper: On the size of U.S. government: political economy in the neoclassical growth model (1997)
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