Are Budget Deficits Used Strategically?
AbstractThis paper tests empirically the strategic explanation of budget deficits suggested by Tabellini and Alesina and Persson and Svensson. Tabellini and Alesina suggest that governments with di erent political orientation provide different public goods. The model predicts that: a) public good provision follows a political pattern; b) the incumbent that anticipates her defeat at the next election runs budget deficits to tie the hands of the future government. Persson and Svensson suggest that liberal governments prefer more public good provision than conservative ones. The model predicts that: a) the conservative (liberal) incumbent that anticipates her defeat at the next election runs budget deficits (surpluses); b) budget imbalances have a political color. Using U.S. and pooled data for sixteen OECD countries, we find little evidence that the incumbent's probability of being voted out of office explains budget deficits, that the provision of public goods follows a political pattern or that budget imbalances have a political color.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 578.
Length: 38 pages
Date of creation: 01 Jun 2003
Date of revision:
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Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
Web page: http://fmwww.bc.edu/EC/
More information through EDIRC
Budget deficit; Voting; Elections;
Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-10-12 (All new papers)
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