A political-economy model of taxation and government expenditures with differentiated candidates

We develop a model of political competition between two office-motivated candidates who choose which level of taxation (and implied government spending) to propose as their election platform. Candidates generally differ in the amount of public good they can produce for a given level of tax revenue. Voters differ in their incomes, as well as in their preference for the public good relative to private consumption. The two candidates propose strictly differentiated platforms that play to their strengths of providing lots of public good, or managing limited government, respectively. Equilibrium platforms depend on the candidates’ production functions and on the preferences of (some) voter types, but not on the distribution of voter types in the population. Thus, the equilibrium differs starkly from the one in the standard model with identical candidates. We also derive comparative statics and empirical predictions. JEL Classification Numbers: D72, D60.