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Public expenditure distribution, voting, and growth

Journal of Public Economic Theory

Published online on


In this paper, we study why the misallocation of resources across different productive sectors tends to persist over time. To this end, we propose a general equilibrium model that delivers two structural relations. On one hand, the public expenditure distribution influences the future sectoral composition of the economy. On the other hand, the distribution of vested interests across sectors determines public policy decisions. The model predicts that different initial sectoral compositions entail different future streams of public expenditure and therefore different development paths.