The economics and politics of the structure of public expenditure

The paper derives a complete system of demand equations for public consumpt ion expenditures as the outcome of rational behaviour in a model where gove rnment maximizes expected electoral support. The allocation of expenditures is found to depend not only on the prices of public services and total exp enditure and to satisfy the constraints of demand theory, which have been t he focus of attention of previous empirical studies of the allocation of pu blic expenditures, but, in addition, on the prices of private consumption g oods, the distribution of voter incomes and the expected change in voter su pport from varying the levels of public provision.