A politico-economic model of public expenditure and income taxation

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• dc.contributor.author Mayoral, Laura
• dc.contributor.author Esteban, Joan
• dc.date.accessioned 2021-04-07T07:53:17Z
• dc.date.available 2021-04-07T07:53:17Z
• dc.date.issued 2019
• dc.description.abstract This paper contributes to the literature on majority voting over fiscal policies. We depart from the standard model in two dimensions. First, besides redistributing income, the government uses the net tax revenue to finance the provision of goods and services that become in-kind transfers to the citizens. By deciding on the composition of this expenditure (education, health, law-and-order, etc.), the government chooses the allocation of the benefits to the different income segments. This choice is a fundamental ingredient of fiscal policy. Second, we tackle the problem of choosing the income tax function and the composition of public expenditure by assuming that the political process selects one of these issues as the salient one. Political controversy and vote focus on this issue exclusively. The other dimension is determined in a way so as to minimize objections (obtain consensus) among the voters. We analyze the case where the salient policy is the composition of public expenditure. We show that for each voted expenditure policy, there is a unique income tax function that attains consensus. The political process we model yields that the progressiveness of the income tax schedule depends on income inequality interacted with the elasticity of substitution of the goods provided in the market and those publicly provided. This relationship is confirmed in our empirical test.en
• dc.description.sponsorship Mayoral and Esteban research has been funded by the Spanish Ministry of Economy and Competitiveness Grant, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015—0563) and Grant ECO 2015—66883–P, Generalitat de Catalunya Project 2017SGR1359Δ, and the National Science Foundation Grant SES-1629370. Useful comments by Jordi Caballé, Eliana la Ferrara and Kalle Moene are gratefully acknowledged. Andrew Gianou has provided us with excellent research assistance.
• dc.format.mimetype application/pdf
• dc.identifier.citation Mayoral L, Esteban J. A politico-economic model of public expenditure and income taxation. SERIEs. 2019 Jul 17;10:479-507. DOI: 10.1007/s13209-019-0198-4
• dc.identifier.doi http://dx.doi.org/10.1007/s13209-019-0198-4
• dc.identifier.issn 1869-4187
• dc.identifier.uri http://hdl.handle.net/10230/47035
• dc.language.iso eng
• dc.publisher Springer
• dc.relation.ispartof SERIEs. 2019 Jul 17;10:479-507
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/SEV-2015-0563
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2015-66883–P
• dc.rights This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by/4.0/
• dc.subject.keyword Government policyen
• dc.subject.keyword Income taxationen
• dc.subject.keyword Inequalityen
• dc.subject.keyword Public expenditureen
• dc.subject.keyword Size of governmenten
• dc.title A politico-economic model of public expenditure and income taxationen
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/publishedVersion