() and Mats Persson
Jonas Agell: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Mats Persson: Institute for International Economic Studies, Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Abstract: We study the size of government and of GDP, under autocratic and democratic rule, respectively. It turns out that first, both democratic and authoritarian rulers apply the Samuelson (1954) criterion when deciding on productive public goods. Second, the labor supply elasticity and the skewness of the ability distribution determine whether democracy or autocracy will lead to the highest output. Third, when the ability distribution is sufficiently skewed, the democratic majority will behave like a rational autocrat, who chooses the tax rate that maximizes tax revenue. Fourth, population ageing in Western societies may lead to the policy preferred by a rational autocrat.
31 pages, June 16, 2006
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