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The Composition of Government Expenditure with Alternative Choice Mechanisms

  • Creedy, John
  • Moslehi, Solmaz

This paper investigates the choice of the composition of government expenditure using both positive and normative approaches. The former involves aggregation over selfish voters (simple majority voting and stochastic voting are examined), while the latter involves the choice by a single disinterested individual (considered to maximise a social welfare function). The approach allows direct comparisons of the choice mechanisms. The structures examined include a transfer payment combined with a pure public good, and a transfer payment with tax-financed education. Explicit solutions are obtained for the choice of expenditure components, and these are shown to depend on the proportional difference between the arithmetic mean and another measure of location of incomes, where the latter depends on the choice mechanism. In each case the expenditure composition depends on an inequality measure defined in terms of the proportional difference between a measure of location of the income distribution and the arithmetic mean, where the location measure depends on the decision mechanism.

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File URL: http://researcharchive.vuw.ac.nz/handle/10063/2433
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Paper provided by Victoria University of Wellington, Chair in Public Finance in its series Working Paper Series with number 2433.

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Date of creation: 2012
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Handle: RePEc:vuw:vuwcpf:2433
Contact details of provider: Postal: School of Accounting & Commercial Law, Victoria University of Wellington, PO Box 600, Wellington, New Zealand
Phone: +64 (4) 463 5775
Fax: +64 (4) 463 5076
Web page: http://www.victoria.ac.nz/sacl/about/chair-in-public-finance
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  1. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, 02.
  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. 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.
  4. Jorge Soares, 2006. "A dynamic general equilibrium analysis of the political economy of public education," Journal of Population Economics, Springer, vol. 19(2), pages 367-389, June.
  5. Tridimas, George, 2001. " The Economics and Politics of the Structure of Public Expenditure," Public Choice, Springer, vol. 106(3-4), pages 299-316, March.
  6. Jean Hindriks & Gareth D. Myles, 2006. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262083442, June.
  7. 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.
  8. Bearse, P. & Glomm, G. & Jeneba, E., 1999. "Composition of Government Budget, Non-Single Peakedness and Majority Voting," Papers 9903, Michigan State - Econometrics and Economic Theory.
  9. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  10. 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.
  11. 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.
  12. Shelton, Cameron A., 2007. "The size and composition of government expenditure," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2230-2260, December.
  13. repec:cup:cbooks:9780521894753 is not listed on IDEAS
  14. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  15. Jim Dolmas, 2008. "What do majority-voting politics say about redistributive taxation of consumption and factor income? Not much," Working Papers 0814, Federal Reserve Bank of Dallas.
  16. Cameron A. Shelton, 2007. "The Size and Composition of Government Expenditure," Wesleyan Economics Working Papers 2007-002, Wesleyan University, Department of Economics.
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