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Endogenous growth in a model with heterogeneous agents and voting on public goods

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  • Borissov, Kirill
  • Surkov, Alexander

Abstract

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.

Suggested Citation

  • Borissov, Kirill & Surkov, Alexander, 2010. "Endogenous growth in a model with heterogeneous agents and voting on public goods," MPRA Paper 27517, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27517
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    1. Sorger, Gerhard, 2002. "On the Long-Run Distribution of Capital in the Ramsey Model," Journal of Economic Theory, Elsevier, vol. 105(1), pages 226-243, July.
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    6. Sarte, Pierre-Daniel G., 1997. "Progressive taxation and income inequality in dynamic competitive equilibrium," Journal of Public Economics, Elsevier, vol. 66(1), pages 145-171, October.
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    8. 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.
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    More about this item

    Keywords

    economic growth; voting; proportional; flat-rate; linear tax; lump-sum tax; heterogeneous agents; endogenous growth;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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