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Income Inequality, Voting Over the Size of Public Consumption, and Growth

Volker Grossmann ()

No 731, CESifo Working Paper Series from CESifo Group Munich

Abstract: According to a standard argument, higher income inequality fosters redistributive activities of the government in favor of the median income earner. This paper shows that if redistribution is achieved by a public provision of goods and services rather than by transfers, higher income inequality may imply a smaller size of the government in majority voting equilibrium. In addition to a static voting model, an endogenous growth model is analyzed to examine the role of saving decisions of heterogeneous individuals for both the distributional incidence of proportional factor income taxes and the voting outcome.

Keywords: income distribution; public consumption; majority voting; investment-driven growth (search for similar items in EconPapers)
Date: 2002
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Journal Article: Income inequality, voting over the size of public consumption, and growth (2003) Downloads
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