Public Expenditure Distribution, Voting, and Growth
57 Pages Posted: 11 Jul 2014
Date Written: April 24, 2014
In this paper we study why the misallocation of resources across different productive sectors tends to persist over time. To this end we propose a general equilibrium model that delivers two structural relations. On the one hand, the public expenditure distribution influences the future sectoral composition of the economy; on the other, the distribution of vested interests across sectors determines public policy decisions. The model predicts that different initial sectoral compositions entail different future streams of public expenditure and therefore different development paths.
Keywords: public expenditure, sectoral composition, vested interests, economic growth
JEL Classification: O41, O43
Suggested Citation: Suggested Citation