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Public Sector Economics

Public Sector Economics. Nondemocractic Public Sectors. Olson’s bandits. tax revenue = the efficiency loss of redistribution is limited when governments are stable eg., stable dictator eg., stable democratic majority

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Public Sector Economics

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  1. Public Sector Economics Nondemocractic Public Sectors

  2. Olson’s bandits • tax revenue = • the efficiency loss of redistribution is limited when governments are stable • eg., stable dictator • eg., stable democratic majority • a stable government limits taxation in order to keep the tax base sufficiently large • LR vs SR Laffer curve

  3. Olson’s on democracy vs nondemocracy • democracy = Meltzer-Richard • nondemocracy = Laffer curve maximum (whether Laffer curve is SR or LR depends on autocrat’s expected tenure) • in theory, nondemocracies • maximize revenue • spend on the public only when the spending sufficiently enlarges the tax base • in theory, democracies • redistribute from rich to poor • redistribute more when income distribution is skewed • Becker: democracy is about competitiveness, not voting

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