120-05
Universität Siegen
Fachbereich Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht
Volkswirtschaftliche Diskussionsbeiträge
Jens Siebel
Budget deficit, size of the public sector and majority voting
In this paper
Tabellini’s and Alesina’s (1990) median voter model for the
explanation of budget deficits is modified by endogenizing the private
sector. Debt finance is supplemented by taxing a private consumption which
serves as an additional source of revenue for funding the public sector.
The introduction of the private sector enables us to explain the budget
balance as a result of political polarization with a left-wing party and
a right-wing party having different preferences for the size of the public
sector.