Distribution Of Government Spending Research Articles

The right type of legislator: A theory of taxation and representation

We develop a theory of taxation and the distribution of government spending in a citizen-candidate model of legislatures. Individuals are heterogeneous in two dimensions: productive ability in the private sector and negotiating ability in politics. When these are positively correlated, rich voters always prefer a rich legislator, but poor voters face a trade-off. A rich legislator will secure more pork for the district, but will also prefer lower taxation than the poor voter. Our theory organizes a number of stylized facts across countries about taxation and redistribution, parties, and class representation in legislatures. We demonstrate that spending does not necessarily increase when the number of legislators increases, as the standard common-pool intuition suggests, and that many policies aimed at increasing descriptive representation may have the opposite effect.

Redistribution and risk sharing in Italy: learning from the past

ABSTRACTRedistribution and risk sharing in Italy: learning from the past. Regional Studies. This paper investigates the role of public policies in Italy by assessing both the redistribution and the risk-sharing functions of interregional net fiscal flows in the long run. Its comparative approach allows one to contrast results obtained for two periods characterized by diverse regional policy and dynamics of regional convergence. Although based on a specific example, the evidence supports more general conclusions: when assessing the regional redistributive and risk-sharing power of national fiscal policies, many different factors related to the existing policy regime should be accounted for, particularly the distribution of government spending between current expenditure and public investment.

Seat-vote elasticity and the provincial distribution of government spending in Turkey

The main question to be explored in this paper is, whether results of parliamentary elections have an impact on the provincial per-capita government spending. A firmly related question to which the literature has sought an answer and which also assists the effort to answer the question at the center of this study is how a government, interested in maximizing its electoral support, allocates government spending across administrative units (i.e. provinces for Turkey, states for the US). A possible answer to be given to this question relies in the seat-vote elasticities in provinces. The term stands for a coefficient that shows the relation between changes in percentage of seats in response to changes in the percentages of votes. It has been argued that electoral systems, with predominantly majoritarian characteristics, tend to display higher levels of seat-vote elasticity whereas systems mainly revealing proportional traits are characterized by lower levels of seat-vote elasticity. Turkish parliamentary electoral system is proportional election. Yet, levels of seat-vote elasticities may still be a determinant in the allocation of government spending across provinces in Turkey. With regards to the relation between seat-vote elasticity and per capita government spending, it is a widely held belief that the administrative units with a high level of seat-vote elasticity should benefit more from government spending, and those with low level of seat-vote elasticity should benefit less. The paper begins with the calculation of the seat-vote elasticities for 67 provinces for the six general elections held between 1990 and 2013. Then these seat-vote elasticity figures are used as explanatory variables in a fixed effects regression in which the dependent variable is the shares of per capita government spending across provinces. Results will be compared with the findings of the literature that conclude as highly elastic seat-vote relation demands more per capita government spending.

Vanishing Corporate Income and Government Spending in Distribution Models

Many distribution models that are workhorses for tax policy, and more broadly for research on immobility and inequality, are insufficient welfare measures of either the status quo or policy proposals. This paper explores two fundamental modeling problems: The omission of corporate income, and the open-model complication caused by incomplete distribution of government spending and deficit effects.Capital-gain-realization (CGR) based models understate corporate income, and therefore overstate progressivity, by failing to capture even the corporate net income tax base itself, not to mention the omission of assorted corporate tax expenditures (both of these omissions contrast with the CGR model’s income inclusivity with respect to the individual income and payroll taxes). Most damaging is the CGR model’s inability to capture deferral, which is the primary tax benefit accorded corporate (and other capital) investment. An inclusive corporate income method is offered as an alternative to both the CGR method and the full-accrual approach (the latter is theoretically desirable, but, as a recent attempt shows, its implementation is problematic), with implications for the status quo, proposals to restructure the corporate tax, and ongoing empirical research on the potential shifting of the burden of the corporate tax. Traditional models also generally omit the distribution of full government spending and deficit effects. These omissions wouldn’t be an issue if there were supplemental models that contemporaneously measured these effects, but that additional modeling is absent from policy discussions, with little warning about these omissions given to distribution model users. Omitting full distribution of government spending and deficit effects biases traditional distribution models in favor of tax cuts and deficit spending, and makes the overall system look more progressive than it really is. In light of recent CBO and other research, these omissions are fixable, or at the very least should be heavily caveated in distributional models.

Politics, Government Spending, and Growth: Evidence from Greece

I study the allocation of pork barrel spending, and the impact of politics on regional growth in Greece, using a large dataset that covers the period between 1959 and 2010. I find that electoral districts that lean towards the majority party receive more spending from the central government, and grow faster. Theoretically, this association could be either because parties reward the regions that vote for them, because majority MPs divert funds towards their constituencies, or both. Since, the electoral law by design creates some quasi-random variation in the allocation of parliamentary seats, it is possible to distinguish the effect of voting for the “right” party from the effect of being represented by the “right” people. The electoral support and the representation in the parliamentary majority variables have a significant joint effect on the distribution of government spending, but the precise nature of the link is unclear. In the case of growth, there is evidence that both explanations are relevant. Finally, regions do not seem to enjoy any additional benefits when their elected representatives also occupy positions in the executive branch of the government. ∗batzilis@uchicago.edu; 1126 East 59th Street, Chicago, IL 60637

Who Pays Taxes and Who Receives Government Spending? An Analysis of Federal, State and Local Tax and Spending Distributions, 1991-2004

While the U.S. tax system is progressive, the distribution of government spending makes the overall fiscal system more progressive than is apparent from tax distributions alone. Using a microdata model we estimate the distribution of federal, state and local taxes and spending between 1991 and 2004. We find households in the lowest quintile of income received roughly $8.21 in federal, state and local government spending for every dollar of taxes paid in 2004, while households in the middle quintile received $1.30, and households in the top quintile received $0.41. Overall, tax payments exceeded government spending received for the top two quintiles of income, resulting in a net fiscal transfer of between $1.031 trillion and $1.527 trillion between quintiles. Both taxes and spending appear to have large distributional effects on households, and these effects have grown since 1991. The results suggest tax distributions alone are an inadequate measure of progressivity, and policymakers should examine both tax and spending distributions when judging the overall fairness of policy toward income groups.

Room to Move: International Financial Markets and National Welfare States

A central research question in international political economy concerns the influence of financial markets on government policy outcomes. To what extent does international capital mobility limit government policy choices? I evaluate the relationship between international financial markets and government policy outcomes, with a focus on the government bond market in developed democracies. Evidence includes interviews with financial market participants and a cross-sectional time-series analysis of the determinants of interest rates. This evaluation suggests that governments of developed democracies face strong but narrowly defined financial market pressures. Financial market participants are concerned with a few macroeconomic policy indicators, including inflation rates and government deficit/GDP ratios, but not with micropolicy indicators, such as the distribution of government spending across functional categories. In these areas, governments retain policymaking autonomy. I conclude by exploring the role of financial market influences within domestic politics and offering suggestions for further research.