Public Finance Review

The marginal cost of redistribution is the real economic cost to upper-income households per dollar of benefit to lower-income households; it exceeds 1 because of the efficiency costs of redistributive policies. This article examines the determinants of this marginal cost for linear income tax and negative income tax policies. It develops analytical expressions to calculate marginal cost that show how it depends on initial marginal tax rates, the degree of inequality, and labor supply elasticities. For plausible parameter values, marginal cost is estimated to be quite high; the article also offers an intuitive explanation for this result. The possibility of using different policies that redistribute income at lower cost is discussed.

The ratchet theory of government growth hypothesizes that temporary crises cause government spending to rise and to remain permanently higher than if the crises had not occurred. An examination of federal government spending in the United States since 1800 reveals apparent ratchets associated with the Great Depression, the two world wars, and the Civil War. After taking account of war-related spending and serial correlation in the data, however, only the World War I and Great Depression ratchets can be clearly identified, and they are closely associated with a major change in the underlying growth rate of government spending early in the 20th century. This casts doubt on the ratchet theory of government growth and instead raises the question of why the trend growth rate of government was so much greater in the 20th century than in the 19th.

Empirical tests of basic formulations of a median voter approach versus a political support maximization approach to state government decision making are conducted in this article. Refutable empirical implications are rigorously developed from the theoretical models and are tested with data on welfare programs for which there is both a state and a federal component. The programs analyzed include both an in-kind program (Medicaid) and a cash transfer program (AFDC). Efficient esti mates are produced by using a systemwide approach in the estimation. The results favor the use of political support models that include altruistic motives on the part of taxpayers. Empirical estimates indicate that a state's welfare generosity per poor person falls with the total number of poor, rises with the total number of nonpoor, and rises with the strength of a relevant producer group.

The explanations of turnover in legislatures developed by political scientists are combined with an economic cartel model of the organization of legislatures to explain interstate variation in turnover in the period 1972-1986. Few robustly significant determinants are found and the results question the applicability of the theory of industrial organization to this area of political organization.

The influence of government structure on the efficient allocation of public resources is examined A test developed by Brueckner is used to examine differences in the allocative efficiency of representative versus direct democracy forms of local government. The empirical results suggest that the form of government has no influence on the level of allocative efficiency.

The results of Sandler and Posnett (1991) are generalized using a simple representation of conjectural variations.