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

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  • Volker Grossmann

Abstract

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.

Suggested Citation

  • Volker Grossmann, 2002. "Income Inequality, Voting Over the Size of Public Consumption, and Growth," CESifo Working Paper Series 731, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_731
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    Cited by:

    1. Sigrid Roehrs & David Stadelmann, 2010. "Mobility and local income redistribution," Working Papers 2010/4, Institut d'Economia de Barcelona (IEB).
    2. Creedy, John & Moslehi, Solmaz, 2009. "Modelling the composition of government expenditure in democracies," European Journal of Political Economy, Elsevier, vol. 25(1), pages 42-55, March.
    3. John Creedy & Shuyun May Li & Solmaz Moslehi, 2008. "The Composition of Government Expenditure in an Overlapping Generations Model," Department of Economics - Working Papers Series 1043, The University of Melbourne.
    4. Kirill Borissov & Alexander Surkov, 2010. "Endogenous Growth in a Model with Heterogeneous Agents and Voting on Public Goods," EUSP Department of Economics Working Paper Series Ec-01/10, European University at St. Petersburg, Department of Economics, revised 29 Sep 2010.
    5. Holger Strulik, 2007. "A distributional theory of government growth," Public Choice, Springer, vol. 132(3), pages 305-318, September.
    6. Poutvaara, Panu, 2011. "The expansion of higher education and time-consistent taxation," European Journal of Political Economy, Elsevier, vol. 27(2), pages 257-267, June.
    7. Thomas Leoni & Wolfgang Pollan, 2003. "The Impact of Inequality on Economic Growth," WIFO Working Papers 211, WIFO.
    8. Margarita Katsimi & Thomas Moutos, 2004. "Monopoly, Inequality and Redistribution via the Public Provision of Private Goods," CESifo Working Paper Series 1318, CESifo Group Munich.
    9. Andros Kourtellos & Alex Lenkoski & Kyriakos Petrou, 2017. "Measuring the Strength of the Theories of Government Size," University of Cyprus Working Papers in Economics 11-2017, University of Cyprus Department of Economics.
    10. Sigrid Röhrs & David Stadelmann, 2014. "Homeownership, Mobility, And Local Income Redistribution," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(4), pages 569-605, August.

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