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Political Influence, Economic Interests and Endogenous Tax Structure in a Computable Equilibrium Framework: with Applicatioon to the United States, 1973 and 1983

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  • HOTTE, Louis
  • WINER, Stanley L.

Abstract

A full understanding of public affairs requires the ability to distinguish between the policies that voters would like the government to adopt, and the influence that different voters or group of voters actually exert in the democratic process. We consider the properties of a computable equilibrium model of a competitive political economy in which the economic interests of groups of voters and their effective influence on equilibrium policy outcomes can be explicitly distinguished and computed. The model incorporates an amended version of the GEMTAP tax model, and is calibrated to data for the United States for 1973 and 1983. Emphasis is placed on how the aggregation of GEMTAP households into groups within which economic and political behaviour is assumed homogeneous affects the numerical representation of interests and influence for representative members of each group. Experiments with the model suggest that the changes in both interests and influence are important parts of the story behind the evolution of U.S. tax policy in the decade after 1973.

Suggested Citation

  • HOTTE, Louis & WINER, Stanley L., 1998. "Political Influence, Economic Interests and Endogenous Tax Structure in a Computable Equilibrium Framework: with Applicatioon to the United States, 1973 and 1983," Cahiers de recherche 9802, Universite de Montreal, Departement de sciences economiques.
  • Handle: RePEc:mtl:montde:9802
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    File URL: http://hdl.handle.net/1866/453
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    Cited by:

    1. Hotte, Louis & Winer, Stanley L., 2012. "Environmental regulation and trade openness in the presence of private mitigation," Journal of Development Economics, Elsevier, vol. 97(1), pages 46-57.
    2. 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.
    3. George Tridimas & Stanley L. Winer, 2004. "A Contribution to the Political Economy of Government Size: 'Demand', 'Supply' and 'Political Influence'," Carleton Economic Papers 04-04, Carleton University, Department of Economics.
    4. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2009. "Economic integration and the relationship between profit and wage taxes," Public Choice, Springer, vol. 138(3), pages 423-446, March.

    More about this item

    Keywords

    litical comtition; obabilistic voting; litical influence; tax licy; blic goods; GEMTAP; comtable equilibrium;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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