"Wasteful" Public Spending and State Aid Control
AbstractThe conventional academic rationale for supranational intervention to curb state aids to industry appeals to transfrontier spillovers. However, competition policy practitioners often speak in terms of curbing "wasteful" spending, regardless of whether or not any international spillovers are involved. Although it is often argued that such wasteful spending calls not for supranational state aid control but rather for better domestic political accountability, this paper argues that wasteful spending may be a by-product of accountability, not a symptom of its absence. Specifically, we describe a model in which politicians fund projects that are wasteful as a way to signal their diligence, and voters rationally reward them for this. We discuss implications for the role of state aid control mechanisms. (JEL: D72, D78, D82, H25) (c) 2006 by the European Economic Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by MIT Press in its journal Journal of the European Economic Association.
Volume (Year): 4 (2006)
Issue (Month): 2-3 (04-05)
Contact details of provider:
Web page: http://www.mitpressjournals.org/jeea
Other versions of this item:
- Mathias Dewatripont & Paul Seabright, 2006. ""Wasteful" public spending and state aid control," ULB Institutional Repository 2013/165574, ULB -- Universite Libre de Bruxelles.
- Mathias Dewatripont & Paul Seabright, 2006. "Wasteful public spending and state aid control," ULB Institutional Repository 2013/9635, ULB -- Universite Libre de Bruxelles.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Aubert, Cécile & Falck, Oliver & Heblich, Stephan, .
"Subsidizing National Champions: An Evolutionary Perspective,"
Chapters in Economics,
University of Munich, Department of Economics.
- Cécile Aubert & Oliver Falck & Stephan Heblich, 2008. "Subsidizing National Champions: An Evolutionary Perspective," CESifo Working Paper Series 2380, CESifo Group Munich.
- Christoph Bertsch & Claudio Calcagno & Mark Le Quement, 2009. "State aid and tacit collusion," Economics Working Papers ECO2009/36, European University Institute.
- Christa Hainz & Hendrik Hakenes, 2009.
"The Politician and his Banker – How to Efficiently Grant State Aid,"
Ifo Working Paper Series
Ifo Working Paper No. 71, Ifo Institute for Economic Research at the University of Munich.
- Hainz, Christa & Hakenes, Hendrik, 2012. "The politician and his banker — How to efficiently grant state aid," Journal of Public Economics, Elsevier, vol. 96(1), pages 218-225.
- Pierre-André Buigues & Khalid Sekkat, 2011. "Public Subsidies to Business: An International Comparison," Journal of Industry, Competition and Trade, Springer, vol. 11(1), pages 1-24, March.
- Giorgio Barba Navaretti & Anthony J. Venables, 2013.
"Multinationals and industrial policy,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 29(2), pages 361-382, SUMMER.
- Hendrik Hakanes & Christa Hainz, 2008.
"The Politician and his Banker,"
Working Paper Series of the Max Planck Institute for Research on Collective Goods
2008_01, Max Planck Institute for Research on Collective Goods.
- Christa Hainz & Hendrik Hakenes, 2007. "The Politician and his Banker," CESifo Working Paper Series 2153, CESifo Group Munich.
- Hainz, Christa & Hakenes, Hendrik, 2007. "The Politician and his Banker," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 222, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Martin Gregor & Dalibor Roháč, 2009.
"The Optimal State Aid Control: No Control,"
Czech Economic Review,
Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 093-113, March.
- Áron Kiss, 2009.
"Coalition politics and accountability,"
Springer, vol. 139(3), pages 413-428, June.
- Kiss, Áron, 2009. "Coalition politics and accountability," Discussion Papers, Research Unit: Market Processes and Governance SP II 2009-01, Social Science Research Center Berlin (WZB).
- Lars Calmfors & Giancarlo Corsetti & Michael P. Devereux & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2008. "Chapter 4: Industrial policy," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 105-124, 02.
- Hussein Kassim & Bruce Lyons, 2013. "The New Political Economy of EU State Aid Policy," Journal of Industry, Competition and Trade, Springer, vol. 13(1), pages 1-21, March.
- de Bettignies, Jean-Etienne & Ross, Thomas W., 2009. "Public-private partnerships and the privatization of financing: An incomplete contracts approach," International Journal of Industrial Organization, Elsevier, vol. 27(3), pages 358-368, May.
- CARAGANCIU Anatolie & CARARE Petru, 2014. "State Aid Within The Framework Of Competition Policy," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 66(1), pages 37-44.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If references are entirely missing, you can add them using this form.