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http://ssrn.com/abstract=139570
 
 

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Deadweight Costs and the Size of Government


Gary S. Becker


University of Chicago - Department of Economics; University of Chicago - Booth School of Business

Casey B. Mulligan


University of Chicago; National Bureau of Economic Research (NBER)

November 1998

NBER Working Paper No. w6789

Abstract:     
We provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare and show that tax system or spending program which is suboptimal from a Ramsey point of view can improve taxpayer welfare because the system creates additional political pressure for suppressing the growth of government. Relevant examples include the use of inflation taxes capital taxes, excise taxes, deficit financing, and income taxes with many We also demonstrate the similarity of the political responses to revenue shocks, spending shocks, changes in program efficiency. In a broad sample of countries for the years 1973 - 90, we show that broad-based taxes with fairly flat rate structures -- are associated with larger governments. An analysis of defense spending -- especially wartime spending -- oil shocks, intergovernmental grants, and other flypaper effects suggests that the cause and effect is not from spending to tax structures.

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Date posted: April 30, 2000  

Suggested Citation

Becker, Gary S. and Mulligan, Casey B., Deadweight Costs and the Size of Government (November 1998). NBER Working Paper No. w6789. Available at SSRN: http://ssrn.com/abstract=139570

Contact Information

Gary S. Becker
University of Chicago - Department of Economics ( email )
1126 East 59th Street
Chicago, IL 60637
United States
University of Chicago - Booth School of Business
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Casey B. Mulligan (Contact Author)
University of Chicago ( email )
1126 East 59th Street
Chicago, IL 60637
United States
773-702-9017 (Phone)
773-702-8490 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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