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Endogenous Growth in a Model with Heterogeneous Agents and Voting on Public Goods

Kirill Borissov () and Alexander Surkov ()

No 2010/01, EUSP Department of Economics Working Paper Series from European University at St. Petersburg, Department of Economics

Abstract: We consider a Barro-type endogenous growth model in which the government's purchases of goods and services enter into the production function. The provision of government services is financed by flat-rate (linear) income or lump-sum taxes. It is assumed that individuals differing in their discount factors vote on the tax rates. We propose a concept of voting equilibrium leading to some versions of the median voter theorem for steady-state equilibria, fully characterize steady-state equilibria and show that if the median voter discount factor is sufficiently low, the long-run rate of growth in the case of flat-rate income taxation is higher than that in the case of lump-sum taxation.

Keywords: economic growth; taxation; voting (search for similar items in EconPapers)
JEL-codes: D91 H21 H24 H31 O40 P16 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010-08-04, Revised 2010-09-29
Note: Presented at the 11th Annual Conference of the Association for Public Economic Theory (PET10, Istanbul, Turkey, June 25-27, 2010).
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