To “ Rotten Parents and Disciplined Children : a Politico - Economic Theory of Public Expenditure

IN THIS APPENDIX, we present some supplementary material. Section B.1 provides the politico-economic microfoundations of the model. Section B.2 provides the derivation of Equation (9). Section B.3 provides the proof of Proposition 2. Section B.4 extends the analysis under CRRA utility. Section B.5 shows the result of numerical analysis using the alternative method of Krusell, Kuruscu, and Smith (2002). Finally, Section B.6 shows the details of the numerical analysis of a demographic transition such as the one discussed in the text.