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On the Optimal Size of Public Sector under Rent-Seeking competition from State Coffers

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  • Hyun Park
  • Apostolis Philippopoulos
  • Vangelis Vassilatos

Abstract

This paper incorporates competition for fiscal transfers (or, equivalently, rent seeking from state coffers) into a standard general equilibrium model of economic growth and endogenously chosen fiscal policy. The government generates tax revenues, but then each selfinterested individual agent tries to extract, for his own personal benefit, a fraction of these revenues. Extracted tax revenues could alternatively be used to finance economy-wide infrastructure. We look at a Nash equilibrium in individual agents’ behavior, and then investigate what the society should do to discourage rent-seeking competition. The focus is on the optimal size of public sector.

Suggested Citation

  • Hyun Park & Apostolis Philippopoulos & Vangelis Vassilatos, 2003. "On the Optimal Size of Public Sector under Rent-Seeking competition from State Coffers," CESifo Working Paper Series 991, CESifo.
    • Handle: RePEc:ces:ceswps:_991
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    Cited by:

    1. George Economides & Sarantis Kalyvitis & Apostolis Philippopoulos, 2004. "Do Foreign Aid Transfers Distort Incentives and Hurt Growth? Theory and Evidence from 75 Aid-recipient Countries," CESifo Working Paper Series 1156, CESifo.
    2. Pierre Salmon, 2003. "The assignment of powers in an open-ended European Union," Post-Print hal-00445601, HAL.
    3. Konstantinos Angelopoulos & Apostolis Philippopoulos, 2005. "The Role of Government in Anti-Social Redistributive Activities," CESifo Working Paper Series 1427, CESifo.
    4. Konstantinos Angelopoulos & George Economides, 2005. "Rent Seeking, Policy and Growth under Electoral Uncertainty: Theory and Evidence," DEGIT Conference Papers c010_029, DEGIT, Dynamics, Economic Growth, and International Trade.

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    Keywords

    social conflict; fiscal policy; economic growth;
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