TY - JOUR
T1 - On the size of U.S. Government
T2 - Political economy in the neoclassical growth model
AU - Krusell, Per
AU - Ríos-Rull, José Víctor
PY - 1999/12
Y1 - 1999/12
N2 - 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. (JEL E60, H11, P16).
AB - 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. (JEL E60, H11, P16).
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U2 - 10.1257/aer.89.5.1156
DO - 10.1257/aer.89.5.1156
M3 - Article
AN - SCOPUS:0000659469
SN - 0002-8282
VL - 89
SP - 1156
EP - 1181
JO - American Economic Review
JF - American Economic Review
IS - 5
ER -
