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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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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. Kristov, Lorenzo & Lindert, Peter & McClelland, Robert, 1992. "Pressure groups and redistribution," Journal of Public Economics, Elsevier, vol. 48(2), pages 135-163, July.
  2. Bjorvatn, K. & Cappelen, A. W., 2003. "Inequality, segregation, and redistribution," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1657-1679, August.
  3. Giuranno, Michele, 2008. "Regional income disparity and the size of the Public Sector," POLIS Working Papers 114, Institute of Public Policy and Public Choice - POLIS.
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  10. Michele Giuseppe Giuranno, 2005. "Income Inequality and the Size of the Public Sector," Economics Discussion Papers 603, University of Essex, Department of Economics.
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  15. 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.
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  17. 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.
  18. 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.
  19. Persson, Mats, 1995. " Why Are Taxes So High in Egalitarian Societies?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 569-80, December.
  20. Vander Lucas, 2002. "Fiscal federalism and bargaining over transfers," Economics Bulletin, AccessEcon, vol. 28(13), pages A0.
  21. 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.
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