Public goods, voting, and growth

Kirill Borissov, Joseph Hanna and Stéphane Lambrecht
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Joseph Hanna: IDP - Institut du Développement et de la Prospective - EA 1384 - UVHC - Université de Valenciennes et du Hainaut-Cambrésis - IAE - Institut d'Administration des Entreprises - UPHF - Université Polytechnique Hauts-de-France, UVHC - Université de Valenciennes et du Hainaut-Cambrésis

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Abstract: Abstract We study a parametric politico‐economic model of economic growth with productive public goods and public consumption goods. The provision of public goods is funded by a proportional tax. Agents are heterogeneous in their initial capital endowments, discount factors, and the relative weights of public consumption in overall private utility. They vote on the shares of public goods in gross domestic products (GDP). We propose a definition of voting equilibrium, prove the existence and provide a characterization of voting equilibria, and obtain a closed‐form solution for the voting outcomes. Also we introduce a "fictitious" representative agent and interpret the outcome of voting as a choice made by a central planner for his benefit. Finally, we undertake comparative static analysis of the shares of public goods in GDP and of the rate of balanced growth with respect to the discount factors and the preferences for public consumption. The results of this analysis suggest that the representative‐agent version of our model is capable of capturing the interaction between many voting heterogeneous agents only if the heterogeneity is one‐dimensional.

Date: 2019-12
Note: View the original document on HAL open archive server: https://uphf.hal.science/hal-04277150
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Published in Journal of Public Economic Theory, 2019, 21 (6), pp.1221-1265. ⟨10.1111/jpet.12404⟩

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Related works:
Journal Article: Public goods, voting, and growth (2019)
Working Paper: Public Goods, Voting, and Growth (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04277150

DOI: 10.1111/jpet.12404

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