Bureaucracy, Tax System, and Economic Performance

Ingrid Ott

Journal of Public Economic Theory, 2006, vol. 8, issue 5, 839-862

Abstract: This paper investigates the consequences for government size, growth and welfare if a selfish bureaucracy provides a congested input. Alternative exogenous tax systems are introduced and numerical analyses are carried out. The welfare optimum is only met under very specific assumptions: proportional congestion, a tax system only consisting of distortionary taxes and a bureaucracy that maximizes the budget's growth rate. Otherwise the relative size of the public sector becomes suboptimally large thus inducing welfare losses. From a welfare economic point of view bureaucratic selfishness is worse than a suboptimal taxing regime that does not (completely) internalize the congestion externalities.

Date: 2006
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https://doi.org/10.1111/j.1467-9779.2006.00291.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:8:y:2006:i:5:p:839-862

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