Endogenous Growth in a Model with Heterogeneous Agents and Voting on Public Goods
We consider a Barro-type endogenous growth model in which the government's purchases of goods and services enter into the production function. The provision of government services is financed by flat-rate (linear) income or lump-sum taxes. It is assumed that individuals differing in their discount factors vote on the tax rates. We propose a concept of voting equilibrium leading to some versions of the median voter theorem for steady-state equilibria, fully characterize steady-state equilibria and show that if the median voter discount factor is sufficiently low, the long-run rate of growth in the case of flat-rate income taxation is higher than that in the case of lump-sum taxation.
|Date of creation:||04 Aug 2010|
|Date of revision:||29 Sep 2010|
|Note:||Presented at the 11th Annual Conference of the Association for Public Economic Theory (PET10, Istanbul, Turkey, June 25-27, 2010).|
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