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Regional income disparity and the size of the Public Sector

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Giuranno, Michele ()

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Abstract

This paper focuses on the question of how income inequality between two jurisdictions impacts upon 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 inter-regional income distribution is, the greater the under-provision of public goods. Particularly, larger inter-regional 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.

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Paper provided by Department of Public Policy and Public Choice - POLIS in its series P.O.L.I.S. department's Working Papers with number 114.

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Length: 26 pages
Date of creation: Nov 2008
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Handle: RePEc:uca:ucapdv:114

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  1. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March. [Downloadable!] (restricted)
  2. Tridimas, George & Winer, Stanley L., 2005. "The political economy of government size," European Journal of Political Economy, Elsevier, vol. 21(3), pages 643-666, September. [Downloadable!] (restricted)
  3. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  4. Lockwood, Ben, 2002. "Distributive Politics and the Costs of Centralization," Review of Economic Studies, Blackwell Publishing, vol. 69(2), pages 313-37, April.
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  5. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October. [Downloadable!] (restricted)
  6. Peltzman, Sam, 1980. "The Growth of Government," Journal of Law & Economics, University of Chicago Press, vol. 23(2), pages 209-87, October.
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  7. Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(4), pages 569-80, December.
  8. Romer, Thomas, 1975. "Individual welfare, majority voting, and the properties of a linear income tax," Journal of Public Economics, Elsevier, vol. 4(2), pages 163-185, February. [Downloadable!] (restricted)
  9. 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, vol. 15(2), pages 207-228, June. [Downloadable!] (restricted)
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  1. Michele Giuranno, 2009. "Pooling Sovereignty and Subsidiarity Principle," Discussion Papers 09/01, Department of Economics, University of York. [Downloadable!]
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