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American Economic Review: Vol. 89 No. 5 (December 1999)
AER Volume. 89, Issue 5 | 
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On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model
Article Citation
Krusell, Per, and
Jose-Victor Rios-Rull. 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model."
American Economic Review,
89(5): 1156-1181.
DOI: 10.1257/aer.89.5.1156
DOI: 10.1257/aer.89.5.1156
Abstract
We study a dynamic version of Meltzer and Richard's median-voter model of the size of government. Taxes are proportional to total income, and they are redistributed as equal lump-sum transfers. Voting takes place periodically over time, and each consumer votes for the tax rate that maximizes his equilibrium utility. We calibrate the model to U.S. data. Key elements in the calibration are the income and wealth distribution and the parameters governing the leisure and consumption choices. The total size of transfers predicted by our political-economy model is quite close to the size of transfers in the data.
Article Full-Text Access
Full-text Article
Authors
Krusell, Per (U Rochester Inst for Int'l Econ Studies, and CEPR)
Rios-Rull, Jose-Victor (U PA and NBER)
Rios-Rull, Jose-Victor (U PA and NBER)
JEL Classifications
H11: Structure, Scope, and Performance of Government
O41: One, Two, and Multisector Growth Models
P16: Capitalist Systems: Political Economy
O41: One, Two, and Multisector Growth Models
P16: Capitalist Systems: Political Economy
