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Regional Income Disparity and the Size of the Public Sector

  • MICHELE GIUSEPPE GIURANNO

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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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9779.2009.01426.x
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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, vol. 4(2), pages 163-185, February.
  2. 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.
  3. Lockwood, Ben, 1998. "Distributive Politics and the Costs of Centralization," CEPR Discussion Papers 2046, C.E.P.R. Discussion Papers.
  4. Vander Lucas, 2002. "Fiscal federalism and bargaining over transfers," Economics Bulletin, AccessEcon, vol. 28(13), pages A0.
  5. Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 569-80, December.
  6. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
  7. Jaramillo, F. & Kempf, H. & Moizeau, F., 2000. "Inequality and Club Formation," Papiers d'Economie Mathématique et Applications 2000.36, Université Panthéon-Sorbonne (Paris 1).
  8. Bjorvatn, K. & Cappelen, A.W., 2000. "Inequality, Segregation, and Redistribution," Papers 13/00, Norwegian School of Economics and Business Administration-.
  9. Michele Giuseppe Giuranno, 2005. "Income Inequality and the Size of the Public Sector," Economics Discussion Papers 603, University of Essex, Department of Economics.
  10. Allan Meltzer & Scott Richard, 1983. "Tests of a rational theory of the size of government," Public Choice, Springer, vol. 41(3), pages 403-418, January.
  11. 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.
  12. 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.
  13. Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
  14. Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
  15. repec:ebl:ecbull:v:28:y:2002:i:13:p:a0 is not listed on IDEAS
  16. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
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