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On the (sequential) majority choice of public good size and location

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  • Philippe De Donder

    ()

  • Michel Le Breton

    ()

  • Eugenio Peluso

    ()

Abstract

In this paper, we lay the first building blocks of a positive theory of nation formation where national choices consist of the size and location of a public good. Individuals differ both in income and in their preferences for the public good location. Public expenditures are financed either by a lump sum tax or by a proportional income tax. We study both the simultaneous and the sequential determinations of the public good size and location. We show that, while the choice of the type of public good follows the traditional median logic, the majoritarian determination of the taxation rate need not coincide with the choice of a median income citizen. With lump sum financing, income heterogeneity plays no role and the sequential equilibrium consists of the median location together with the public good level most-preferred by the individual located at the median distance from the median. This policy bundle also constitutes an equilibrium with simultaneous voting in the special case of a uniform bivariate distribution of individuals' income and location. With proportional taxation, there is no policy equilibrium with simultaneous voting. We offer a complete characterization of the equations describing the sequential equilibrium in the general case and we show why and how our results depart from those obtained with the lump sum case. The public good level is lower than the one emerging under lump sum taxation when the income distribution is concave and when the correlation between individuals' income and location is positive but not perfect.
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Suggested Citation

  • Philippe De Donder & Michel Le Breton & Eugenio Peluso, 2012. "On the (sequential) majority choice of public good size and location," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(2), pages 457-489, July.
  • Handle: RePEc:spr:sochwe:v:39:y:2012:i:2:p:457-489
    DOI: 10.1007/s00355-012-0656-4
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    References listed on IDEAS

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    1. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
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    5. Philippe De Donder & Michel Le Breton & Eugenio Peluso, 2012. "Majority Voting in Multidimensional Policy Spaces: Kramer–Shepsle versus Stackelberg," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(6), pages 879-909, December.
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    8. Drèze, Jacques & Le Breton, Michel & Savvateev, Alexei & Weber, Shlomo, 2008. ""Almost" subsidy-free spatial pricing in a multi-dimensional setting," Journal of Economic Theory, Elsevier, vol. 143(1), pages 275-291, November.
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    Citations

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    Cited by:

    1. Gregorini, Filippo, 2015. "Political geography and income inequalities," Research in Economics, Elsevier, vol. 69(3), pages 439-452.
    2. Eric Weese & Masayoshi Hayashi & Masashi Nishikawa, 2015. "Inefficiency and Self-Determination: Simulation-based Evidence from Meiji Japan," Discussion Paper Series DP2015-35, Research Institute for Economics & Business Administration, Kobe University.
    3. Vincent Anesi & Philippe De Donder, 2013. "Voting under the threat of secession: accommodation versus repression," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(2), pages 241-261, July.
    4. Tomasz Uryszek, 2014. "Public finance crisis and sustainable development financing – evidence from EU economies," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 3(1), pages 161-173.
    5. Vincent Anesi & Philippe De Donder, 2011. "Voting under the Threat of Secession: Accommodation vs. Repression," CESifo Working Paper Series 3458, CESifo Group Munich.
    6. Bellani, Luna & Scervini, Francesco, 2015. "Heterogeneous preferences and in-kind redistribution: Theory and evidence," European Economic Review, Elsevier, vol. 78(C), pages 196-219.
    7. Luna Bellani & Heinrich Ursprung, 2016. "The Political Economy of Redistribution Policy," CESifo Working Paper Series 6189, CESifo Group Munich.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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