Variations in the Size of the Welfare State: A Preference- Based Explanation

UC Davis Working Paper #96-11

Posted: 18 Mar 1997

See all articles by John E. Roemer

John E. Roemer

Yale University - Department of Political Science; Yale University - Cowles Foundation

Date Written: November 1996

Abstract

Transfer payments as a fraction of GNP in OECD countries vary from 30.4% in Belgium to 11.1% in Greece. We seek a political-economic explanation of this variation, as due to different preferences of national citizenries. Voters are modeled as caring about their personal welfare, the welfare of the unemployed, and the size of government. The political issue is the tax rate, where taxes fund support for those living on transfer payments. With the above formulation, utility functions are single-peaked in the marginal tax rate (the single political dimension); hence, a Condorcet winner exists, which we identify with the observed tax rate in a country. Next, assuming a specific parametric form for the distribution of voter traits, we compute a "preference parameter locus" for each country, a curve in parameter space consistent with the country's having the observed marginal tax rate as its Condorcet winner. We finally compare the preference parameter loci of seven OECD countries.

JEL Classification: D72, H20, P51

Suggested Citation

Roemer, John E., Variations in the Size of the Welfare State: A Preference- Based Explanation (November 1996). UC Davis Working Paper #96-11. Available at SSRN: https://ssrn.com/abstract=4742

John E. Roemer (Contact Author)

Yale University - Department of Political Science ( email )

Box 208269
New Haven, DC 06520-8269
United States
203-432-5249 (Phone)
203-432-6196 (Fax)

HOME PAGE: http://pantheon.yale.edu/~jer39/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

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