Redistributive Taxation, Public Expenditure, and Size of Governent

Sanghamitra Bandyopadhyay (s.bandyopadhyay@qmul.ac.uk) and Joan Esteban (joan.esteban@iae.csic.es)

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We introduce a model of redistributive income taxation and public expenditure. This joint treatment permits analyzing the interdependencies between the two policies: one cannot be chosen independently of the other. Empirical evidence reveals that partisan confrontation essentially falls on expenditure policies rather than on income taxation. We examine the case in which the expenditure policy (or the size of government) is chosen by majority voting and income taxation is consistently adjusted. This adjustment consists of designing the income tax schedule that, given the expenditure policy, achieves consensus among the population. The model determines the consensus in- come tax schedule, the composition of public expenditure and the size of government. The main results are that inequality is negatively related to the size of government and to the pro-rich bias in public expenditure, and positively or negatively related to the marginal income tax, depending on substitutability between government supplied and market goods. These implications are validated using OECD data.

Keywords: Government policy; Income Taxation; Public Expenditure. (search for similar items in EconPapers)
JEL-codes: H23 H50 (search for similar items in EconPapers)
Pages: 41
Date: 2009-12-14
New Economics Papers: this item is included in nep-cdm, nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://pareto.uab.es/wp/2009/79909.pdf (application/pdf)

Related works:
Working Paper: Redistributive Taxation, Public Expenditure, and Size of Governent (2015)
Working Paper: Redistributive Taxation, PublicExpenditure and the Size of Government (2009)
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:aub:autbar:799.09

Access Statistics for this paper

More papers in UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) Contact information at EDIRC.
Bibliographic data for series maintained by Xavier Vila (xavier.vila@uab.cat).