The Composition of Government Expenditure with Alternative Choice Mechanisms
AbstractThis paper investigates the choice of the composition of government expenditure using both positive and normative approaches. The former involves aggregation over selfish voters (simple majority voting and stochastic voting are examined), while the latter involves the choice by a single disinterested individual (considered to maximise a social welfare function). The approach allows direct comparisons of the choice mechanisms. The structures examined include a transfer payment combined with a pure public good, and a transfer payment with tax-financed education. Explicit solutions are obtained for the choice of expenditure components, and these are shown to depend on the proportional difference between the arithmetic mean and another measure of location of incomes, where the latter depends on the choice mechanism. In each case the expenditure composition depends on an inequality measure defined in terms of the proportional difference between a measure of location of the income distribution and the arithmetic mean, where the location measure depends on the decision mechanism.
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Bibliographic InfoPaper provided by Victoria University of Wellington, Chair in Public Finance in its series Working Paper Series with number 2433.
Date of creation: 2012
Date of revision:
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Postal: School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand
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Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
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Government expenditure; Majority voting; Stochastic voting; Public goods; Social welfare;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-13 (All new papers)
- NEP-CDM-2012-10-13 (Collective Decision-Making)
- NEP-PBE-2012-10-13 (Public Economics)
- NEP-POL-2012-10-13 (Positive Political Economics)
- NEP-PUB-2012-10-13 (Public Finance)
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