A Model of the Growth of Government

The present study develops a general equilibrium model of taxation based on the competition of various groups to enter the dominant coalition in the economy. This competition leads to an equilibrium where the net taxes paid by each group are maximized. The model shows that the size of government is a function of the sizes of various groups in the economy, their asset holdings, and their ability to shift assets away from taxable activities. The growth of government can, then, be explained not only by the increase in assets--a formulation of Wagner's law which relates the size of government to the level of income--, but also by changes in the composition of the population and, more importantly, by the reduced opportunities for the use of productive assets, especially skilled labor, in nonmarket activities. In particular the growth of the middle class which relies heavily on the supply of human capital may have led to its increased dependence on the market to higher and more equal incomes, and to the greater power to tax of the government. The model is also capable of explaining the existence of such phenomena as progressive income taxation and sectoral tax and subsidy policies.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2014

Author dc:creator

• Dao, Minh Quang

• Economics, Finance

Identifier

(UMI)AAI8803012

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/70789