Following the disaggregation of the Spanish national accounts,
there are three institutional sectors in the economy: a representative household,
the public sector and the external sector (imports, exports and tourism).
The public sector collects taxes on income, consumption and production,
payroll taxes (mainly paid by employers) and a specific tourist tax that is initially zero.
It also obtains capital income, makes net transfers with other institutions and consumes goods and services.
The result is a public budget in deficit, financed with the savings of other institutions.
The representative household has a fixed amount of time that can be devoted to the consumption of leisure or to supply labor,
obtains income from both labor and capital, makes transfers with other institutions and pays various taxes.
The objective of the household is to maximize welfare subject to budget restrictions.