Furthermore, industries with higher levels of capital stock, fewer capitalists, more inelastic demand, and smaller geographical dispersion are the ones that get organized. Our objective is to check whether the predictions of the Grossman-Helpman model are consistent with the data and, if the model finds support, to estimate its key structural parameters. We find that the pattern of protection in the United States in 1983 is broadly consistent with the predictions of the model. A surprising finding is that the weight of welfare in the government's objective function is many times larger than the weight of contributions. We study a dynamic version of Meltzer and Richard's median-voter model of the 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 tax rate that maximizes his equilibrium utility. We calibrate the model to U.S. data. Key elements in the calibration are the income and wealth distribution and the parameters governing the leisure and consumption choices. The total size of transfers predicted by our political-economy model is quite close to the size of transfers in the data. Sign up for e-AER Bicameralism and Its Consequences for the Internal Organization of Legislatures Daniel Diermeier and Roger B. Myerson Theories of organization of legislatures have mainly focused on the U.S. Congress, explaining why committee systems emerge there, but not explaining variance in organization across legislatures of different countries.