As explored in detail in the previous chapters, the choice of political institutions is driven by their consequences in the distribution of income among citizens of the regime. Knowing that each political regime is a particular mechanism to aggregate the preferences of individuals for the ideal distribution of economic assets in a given society, all political actors develop appropriate strategies to secure their most favorable political regime, that is, the one that maximizes their welfare. The least well-off individuals support a democracy, since it gives them a chance to establish redistributive mechanisms to their advantage. By contrast, well-off citizens, who would have to bear a net loss of income under a democracy, support a constitutional structure in which only they can vote.

If the choice of a political regime is a function of its distributive implications, then the corresponding economic consequences and fiscal arrangements that come with a democracy and an authoritarian regime must differ. Under an authoritarian system, where all or a substantial part of the electorate is excluded from the decision-making process, the size of the public sector should remain small. By contrast, after a transition to democracy shifts the position of the median voter toward the lower side of the income distribution, the level of taxes and public spending should increase, in line with the model of optimal taxation presented in Chapter 1. Still, the size and structure of the public sector in a democracy are characterized by two additional traits.