On the size of US government: Political economy in the neoclassical growthmodel

We study a dynamic version of Meltzer and Richard's median-voter model of t he size of government. Taxes are proportional to total income, and they are redistributed as equal lump-sum transfers, Voting takes place periodically over time, and each consumer votes for the tar rate that maximizes his equ ilibrium utility. We calibrate the model to U.S. data. Key elements in the calibration are the income and wealth distribution and the parameters gover ning the leisure and consumption choices. The total size of transfers predi cted by our political-economy model is quire close to the size of transfers in the data. (JEL E60, H11, P16).