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Income Inequality, Voting Over the Size of Public Consumption, and Growth

  • Volker Grossmann

According to a standard argument, higher income inequality fosters redistributive activities of the government in favor of the median income earner. This paper shows that if redistribution is achieved by a public provision of goods and services rather than by transfers, higher income inequality may imply a smaller size of the government in majority voting equilibrium. In addition to a static voting model, an endogenous growth model is analyzed to examine the role of saving decisions of heterogeneous individuals for both the distributional incidence of proportional factor income taxes and the voting outcome.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-05/731.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 731.

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Date of creation: 2002
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Handle: RePEc:ces:ceswps:_731
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  10. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
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  12. Milanovic, Branko, 2000. "The median-voter hypothesis, income inequality, and income redistribution: an empirical test with the required data," European Journal of Political Economy, Elsevier, vol. 16(3), pages 367-410, September.
  13. Kristov, Lorenzo & Lindert, Peter & McClelland, Robert, 1992. "Pressure groups and redistribution," Journal of Public Economics, Elsevier, vol. 48(2), pages 135-163, July.
  14. 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.
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  17. Cornes, Richard & Sandler, Todd, 2000. "Pareto-Improving Redistribution and Pure Public Goods," Staff General Research Papers 1833, Iowa State University, Department of Economics.
  18. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  19. Branko Milanovic, 2003. "The median voter hypothesis, income inequality and income," HEW 0305001, EconWPA.
  20. Fiaschi, Davide, 1999. "Growth and inequality in an endogenous fiscal policy model with taxes on labor and capital," European Journal of Political Economy, Elsevier, vol. 15(4), pages 727-746, November.
  21. Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
  22. Itaya, Jun-ichi & de Meza, David & Myles, Gareth D., 1997. "In praise of inequality: public good provision and income distribution," Economics Letters, Elsevier, vol. 57(3), pages 289-296, December.
  23. 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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  25. 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.
  26. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  27. Bertola, Giuseppe, 1996. "Factor shares in OLG models of growth," European Economic Review, Elsevier, vol. 40(8), pages 1541-1560, November.
  28. Roemer, John E., 1998. "Why the poor do not expropriate the rich: an old argument in new garb," Journal of Public Economics, Elsevier, vol. 70(3), pages 399-424, December.
  29. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
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