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Article
Democratic public good provision
Journal of Economic Theory (2007)
  • John Hassler
  • Kjetil Storesletten
  • Fabrizio Zilibotti
Abstract

This paper analyzes an overlapping generation model of redistribution and public good provision under repeated voting. Expenditures are financed through age-dependent taxation that distorts human capital investment. Taxes redistribute income both across skill groups and across generations.We focus on politicoeconomic Markov equilibria and contrast these with the Ramsey allocation under commitment. The model features indeterminate equilibria, with a key role of forward-looking strategic voting. Due to the lack of commitment to future policies, the tax burden may be on the wrong side of the dynamic Laffer curve. Moreover, restrictions on government policies can in some cases be welfare improving.

Keywords
  • Markov equilibrium,
  • Political economy,
  • Redistribution,
  • Repeated voting,
  • Multiple equilibria,
  • Public good
Disciplines
Publication Date
February, 2007
Citation Information
John Hassler, Kjetil Storesletten and Fabrizio Zilibotti. "Democratic public good provision" Journal of Economic Theory Vol. Forthcoming (2007)
Available at: http://works.bepress.com/kjetil_storesletten/10/