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Regional Income Disparity and the Size of the Public Sector

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  • MICHELE GIUSEPPE GIURANNO

Abstract

This paper explores the impact of income inequality between jurisdictions on government decision making affecting the size of the public sector. We model policy choices as the outcome of regional representatives' negotiations in the legislature. We show that the more unequal interregional income distribution is, the greater the underprovision of public goods. More specifically, greater interregional income disparity leads to a smaller public sector. A wealthier economy as a result may have a relatively smaller government size when income disparity increases. Copyright � 2009 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 11 (2009)
Issue (Month): 5 (October)
Pages: 697-719

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Handle: RePEc:bla:jpbect:v:11:y:2009:i:5:p:697-719

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  1. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, Elsevier, vol. 4(2), pages 163-185, February.
  2. Bjorvatn, K. & Cappelen, A. W., 2003. "Inequality, segregation, and redistribution," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1657-1679, August.
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  5. Bassett, William F. & Burkett, John P. & Putterman, Louis, 1999. "Income distribution, government transfers, and the problem of unequal influence," European Journal of Political Economy, Elsevier, Elsevier, vol. 15(2), pages 207-228, June.
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  7. repec:ebl:ecbull:v:28:y:2002:i:13:p:a0 is not listed on IDEAS
  8. Lockwood, Ben, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 69(2), pages 313-37, April.
  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
  10. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, Elsevier, vol. 21(3), pages 643-666, September.
  11. Allan Meltzer & Scott Richard, 1983. "Tests of a rational theory of the size of government," Public Choice, Springer, Springer, vol. 41(3), pages 403-418, January.
  12. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, Elsevier, vol. 87(12), pages 2611-2637, December.
  13. Michele Giuseppe Giuranno, 2005. "Income Inequality and the Size of the Public Sector," Economics Discussion Papers, University of Essex, Department of Economics 603, University of Essex, Department of Economics.
  14. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 96-129, March.
  15. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 23(2), pages 209-87, October.
  16. Vander Lucas, 2002. "Fiscal federalism and bargaining over transfers," Economics Bulletin, AccessEcon, vol. 28(13), pages A0.
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Citations

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Cited by:
  1. Piero Cavaleri & Michael Keren & Giovanni B. Ramello & Vittorio Valli, 2009. "Publishing an E-Journal on a Shoe String: Is It a Sustainable Project?," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, Queensland University of Technology (QUT), School of Economics and Finance, vol. 39(1), pages 89-101, March.
  2. Giuranno, Michele, 2009. "The logic of party coalitions with political activism and public financing," POLIS Working Papers, Institute of Public Policy and Public Choice - POLIS 134, Institute of Public Policy and Public Choice - POLIS.
  3. Michele Giuranno, 2009. "Pooling Sovereignty and Subsidiarity Principle," Discussion Papers, Department of Economics, University of York 09/01, Department of Economics, University of York.
  4. Privileggi, Fabio, 2008. "On the transition dynamics in endogenous recombinant growth models," POLIS Working Papers, Institute of Public Policy and Public Choice - POLIS 120, Institute of Public Policy and Public Choice - POLIS.
  5. Giuranno, Michele G. & Rongili, Biswas, 2012. "Inter-jurisdictional migration and the size of government," MPRA Paper 42604, University Library of Munich, Germany.
  6. J. Stephen Ferris, 2010. "Fiscal Policy from a Public Choice Perspective," Carleton Economic Papers, Carleton University, Department of Economics 10-10, Carleton University, Department of Economics.
  7. Fabio Fiorillo & Agnese Sacchi, 2012. "The Political Economy of the Standard Level of Services: The Role of Income Distribution," CESifo Working Paper Series 3696, CESifo Group Munich.
  8. Giuranno, Michele G., 2010. "Pooling sovereignty under the subsidiary principle," European Journal of Political Economy, Elsevier, Elsevier, vol. 26(1), pages 125-136, March.
  9. Bondonio, Daniele, 2009. "Impact identification strategies for evaluating business incentive programs," POLIS Working Papers, Institute of Public Policy and Public Choice - POLIS 129, Institute of Public Policy and Public Choice - POLIS.
  10. Orso, Cristina Elisa, 2009. "Formal and informal sectors: Interactions between moneylenders and traditional banks in the rural Indian credit market," POLIS Working Papers, Institute of Public Policy and Public Choice - POLIS 135, Institute of Public Policy and Public Choice - POLIS.

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