Previous studies were plagued with considerable problems when interpreting and empirically analysing Wagner's Law. Therefore, we initially present some kind of "pure theory of government's share" for a two-person society based on the pure theory of public and private goods as originally developed by Samuelson. We show that Wagner's regime of a representative and authoritative individual and collective decision making a la Samuelson imply different government shares in GNP, though, in principle, Wagner's outcome can be generated even in a Samuelsonian context. Generalizing our results to an n-person society, we derive "optimal" government shares by use of various variants of the model, however, with very different distributional consequences.
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Paper provided by Helmut Schmidt University, Hamburg in its series Working Paper with number
58/2007.
Find related papers by JEL classification: D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H41 - Public Economics - - Publicly Provided Goods - - - Public Goods H50 - Public Economics - - National Government Expenditures and Related Policies - - - General