The political economy of fiscal deficits and government production
AbstractThis paper analyzes a framework where policymakers decide how to spend public resources on physical capital and labor in order to produce two public goods. Candidate policymakers disagree about which goods to produce, and may alternate in office due to elections. When capital and labor are complementary inputs to the production of public goods, the anticipation of political turnover reduces public savings in physical capital rather than finnancial assets. Political turnover renders the stock of physical capital for public production too low and ine¢ ciently combined with labor.
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Bibliographic InfoPaper provided by Norges Bank in its series Working Paper with number 2009/07.
Length: 47 pages
Date of creation: 30 Mar 2009
Date of revision:
Political economics; budget deficits; public investment;
Other versions of this item:
- Natvik, Gisle J., 2013. "The political economy of fiscal deficits and government production," European Economic Review, Elsevier, vol. 58(C), pages 81-94.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H4 - Public Economics - - Publicly Provided Goods
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H6 - Public Economics - - National Budget, Deficit, and Debt
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-02 (All new papers)
- NEP-MAC-2009-05-02 (Macroeconomics)
- NEP-PBE-2009-05-02 (Public Economics)
- NEP-POL-2009-05-02 (Positive Political Economics)
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- Jon H. Fiva & Gisle James Natvik, 2009.
"Do Re-election Probabilities Influence Public Investment?,"
CESifo Working Paper Series
2709, CESifo Group Munich.
- Jon H. Fiva & Gisle James Natvik, 2009. "Do re-election probabilities influence public investment?," Working Papers 2009/36, Institut d'Economia de Barcelona (IEB).
- Jon H. Fiva & Gisle James Natvik, 2009. "Do re-election probabilities influence public investment?," Working Paper 2009/13, Norges Bank.
- Fiva, Jon H. & Natvik, Gisle James, 2009. "Do Re-election Probabilities Influence Public Investment?," Memorandum 16/2009, Oslo University, Department of Economics.
- Jon Fiva & Gisle James Natvik, 2010. "Do re-election probabilities influence public investment?," 2010 Meeting Papers 334, Society for Economic Dynamics.
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