Public expenditure allocation, lobbying, and growth

Ravi Radhakrishnan

Journal of Public Economic Theory, 2022, vol. 24, issue 4, 756-780

Abstract: I develop a two sector model of growth where the final good in each sector is produced using labor and a publicly provided private input (public input). The public input is funded by a proportional tax on the consumption of the two final goods. In the benchmark case, the government allocates the public input between the two sectors to maximize consumer welfare. I contrast the benchmark case to one where the public input allocation is determined via lobbying by firms in the two sectors. In this set up, I first show that allocation of the public input is determined by the relative lobbying power of the firms in the two sectors. Further, lobbying can generate the welfare maximizing allocation only under a very specific set of conditions and, if those set of conditions are not met, then an initial misallocation of the public input gets magnified over time.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/jpet.12570

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:24:y:2022:i:4:p:756-780

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().