Fiscal Churning and Political Efficiency
This paper proposes churned transfers as a measure of political inefficiency. A transfer is churned when at least the same level of voter satisfaction could have been achieved by lowering the voter's tax burden by the amount of the transfer. Previous measures of political efficiency---Pommerehne and Schneider (1983)---depend on the researcher’s assumptions about voter preferences. Churned transfers avoid this problem, but depend on the researcher’s assumptions about government tax and spending incidence. This paper suggests fiscal churning as a supplement to measures of political efficiency that rely on assumptions about the preferences of the median voter. Churning measures promise to throw light on the Chicago-Virginia controversy over the efficiency of political systems.
|Date of creation:||10 Nov 2001|
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