IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Composition of Government Expenditure in an Overlapping Generations Model

  • John Creedy
  • Shuyun May Li
  • Solmaz Moslehi

This paper examines the choice of government expenditure on public goods and transfer payments (in the form of pension) in an overlapping generations model, in which individuals live for two ‘periods’ and expenditure is financed on a pay-as-you-go (PAYG) basis. The condition required for majority support of the social contract involved in the PAYG scheme is established and shown to be independent of tax rates and expenditure levels. The choice of expenditure composition can thus be made conditional on acceptance of the social contract. Two decision mechanisms regarding the choice of government expenditure are considered. The first is positive and involves majority voting and the second is normative and involves maximizing a social welfare function. In each case the ratio of the transfer payment to public goods expenditure depends, among other things, on the ratio of median to mean income. A reduction in the skewness of the income distribution is associated with a reduction in this ratio, at a decreasing rate.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.economics.unimelb.edu.au/downloads/wpapers-08/1043.pdf
Our checks indicate that this address may not be valid because: 404 Not Found (http://www.economics.unimelb.edu.au/downloads/wpapers-08/1043.pdf [301 Moved Permanently]--> http://fbe.unimelb.edu.au/economics/downloads/wpapers-08/1043.pdf). If this is indeed the case, please notify (Aminata Doumbia)


Download Restriction: no

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 1043.

as
in new window

Length: 36 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:mlb:wpaper:1043
Contact details of provider: Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia
Phone: +61 3 8344 5355
Fax: +61 3 8344 6899
Web page: http://www.economics.unimelb.edu.au
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Marina Azzimonti & Eva de Francisco & Per Krusell, 2006. "Median-voter Equilibria in the Neoclassical Growth Model under Aggregation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(4), pages 587-606, December.
  2. Ghiglino, Christian & Tvede, Mich, 2000. "Optimal Policy in OG Models," Journal of Economic Theory, Elsevier, vol. 90(1), pages 62-83, January.
  3. Thomas S. McCaleb, 1985. "Public Choice Perspectives on the Flat Tax Follies," Cato Journal, Cato Journal, Cato Institute, vol. 5(2), pages 613-628, Fall.
  4. John Creedy & Solmaz Moslehi, 2007. "Modelling the Composition of Government Expenditure in Democracies," Department of Economics - Working Papers Series 1007, The University of Melbourne.
  5. Been-Lon Chen, 2006. "Economic growth with an optimal public spending composition," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 123-136, January.
  6. John Creedy & Solmaz Moslehi, 2007. "The Optimal Composition of Government Expenditure," Department of Economics - Working Papers Series 1008, The University of Melbourne.
  7. Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002. "The Survival of the Welfare State," Seminar Papers 704, Stockholm University, Institute for International Economic Studies.
  8. Rainald Borck, 2005. "Voting, Inequality, and Redistribution," Discussion Papers of DIW Berlin 503, DIW Berlin, German Institute for Economic Research.
  9. Pierre-Richard Agénor, 2005. "Fiscal Policy and Endogenous Growth with Public Infrastructure," The School of Economics Discussion Paper Series 0536, Economics, The University of Manchester.
  10. Guido Tabellini & Alberto Alesina, 1988. "Voting on the Budget Deficit," UCLA Economics Working Papers 539, UCLA Department of Economics.
  11. Grossman, Gene & Helpman, Elhanan, 1996. "Intergenerational Redistribution with Short-lived Governments," CEPR Discussion Papers 1396, C.E.P.R. Discussion Papers.
  12. Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October.
  13. Creedy, J & Van de Ven, J, 1997. "Retirement Incomes : Private Savings versus Social Transfers," Department of Economics - Working Papers Series 569, The University of Melbourne.
  14. Bearse, Peter & Glomm, Gerhard & Janeba, Eckhard, 2001. " Composition of Government Budget, Non-single Peakedness, and Majority Voting," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(4), pages 471-81.
  15. repec:cup:cbooks:9780521001151 is not listed on IDEAS
  16. Borge, Lars-Erik & Rattso, J.Jorn, 2004. "Income distribution and tax structure: Empirical test of the Meltzer-Richard hypothesis," European Economic Review, Elsevier, vol. 48(4), pages 805-826, August.
  17. Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2007. "Democratic public good provision," Journal of Economic Theory, Elsevier, vol. 133(1), pages 127-151, March.
  18. Tridimas, George, 2001. " The Economics and Politics of the Structure of Public Expenditure," Public Choice, Springer, vol. 106(3-4), pages 299-316, March.
  19. Grossmann, Volker, 2003. "Income inequality, voting over the size of public consumption, and growth," European Journal of Political Economy, Elsevier, vol. 19(2), pages 265-287, June.
  20. Richard Disney, 2006. "Household Saving Rates and the Design of Public Pension Programmes: Cross–Country Evidence," National Institute Economic Review, National Institute of Economic and Social Research, vol. 198(1), pages 61-74, October.
  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.
  22. Jo Thori Lind, 2005. "Why is there so little redistribution?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 111-125.
  23. repec:cup:cbooks:9780521806428 is not listed on IDEAS
  24. 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.
  25. Per Krusell & Jose-Victor Rios-Rull, 1997. "On the size of U.S. government: political economy in the neoclassical growth model," Staff Report 234, Federal Reserve Bank of Minneapolis.
  26. repec:cup:cbooks:9780521894753 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:1043. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aminata Doumbia)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.