The name is absent

particular group, politicians can increase the expected number of votes from that
group. The model enables us to specify the exact conditions under which rents to
public sector employees will arise. A central issue to be explored is whether tax
competition will tend to reduce such rents and move public sector employment
closer to its socially optimal level.

Below we present the details of the model.

2.1. Tastes and technology

We use the subscript g for variables relating to a government sector employee and
the subscript p for variables referring to a private sector employee. All agents have
identical preferences with respect to consumption (but not with respect to non-
economic aspects of public policy, see sec. 2.4), and the total economic welfare Uj
of a worker employed in sector j is

Uj =u(Cj)+g(G),     j=g,p;                   (2.1)

u⁰ > 0,    u⁰⁰ < 0,g⁰ > 0,    g⁰⁰ < 0,

where Cj is private consumption and G is the non-rival consumption of the public
good. Note that since individual working time is assumed to be institutionally
fixed, there is no need to allow for the disutility of work in the utility function (2.1).

The total population and labour force is normalised to unity and the fraction
of the labour force employed in the public sector is denoted by α, 0 <α<1.Total
capital input into private sector production is (1 - α) k, where k is the capital-
labour ratio, and the total output of private goods (Y ) is given by the linearly
homogeneous production function

Y = F ((1 - α) k, 1 - α) ,                        (2.2)

implying that the average productivity of a private sector worker is

Y

y ≡ z-----= F (k, 1) ≡ f (k) ,     f 0 > 0,     f⁰⁰ < 0.          (2.3)

1-α

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