AUTOCRATIC, DEMOCRATIC, AND OPTIMAL GOVERNMENT

All types of government face two major fiscal decisions: the level of government services and the average tax rate. This paper develops models of autocratic, democratic, and optimal government. The effects of alternative government structures are estimated using a common set of parameters based on US. data. Output and government services are higher in u democracy than in an autocracy, but the tax rate is lower. Output is even higher with an optimal government and both government services and the tax rate are lower. The relative outcomes in any government depend strongly on the fiscal horizon of those who govern. (JEL H11)