Verlag:
Universität Siegen, Fakultät III, Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht, Siegen
Zusammenfassung:
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.