Public Expenditure Distribution, Voting, and Growth

51 Pages Posted: 15 Sep 2010 Last revised: 27 Nov 2011

Lorenzo Burlon

Bank of Italy

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Date Written: August 9, 2011

Abstract

In this paper we try to explain why the misallocation of resources across different productive sectors tends to persist over time. We document that there is a link between the distribution of the public expenditure across sectors and the sectoral composition of an economy. We propose a general equilibrium model that interprets this stylized fact as a reduced form representation of two structural relations, namely, the dynamic effect of the public expenditure on the future distribution of value added and the influence of the distribution of vested interests across sectors on current public policy decisions. The model predicts that different initial sectoral compositions cause different future streams of public expenditures and therefore different paces of development.

Keywords: Public Expenditure, Sectoral Composition, Vested Interests, Economic Growth

JEL Classification: O41, O43

Suggested Citation

Burlon, Lorenzo, Public Expenditure Distribution, Voting, and Growth (August 9, 2011). Available at SSRN: https://ssrn.com/abstract=1677394 or http://dx.doi.org/10.2139/ssrn.1677394

Lorenzo Burlon (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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