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A Common Pool Theory of Deficit Bias Correction

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  • Krogstrup, Signe
  • Wyplosz, Charles

Abstract

The budget deficit bias is modeled as the result of a domestic common pool problem and of an international externality. Along with Piguvian taxes, a number of policy measures are examined and welfare-ranked: deficit ceilings, golden rules and delegation. In general, the combination of delegation and an optimally-set deficit ceiling deliver the social optimum, even if the deficit ceiling is not credible.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5866.

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Date of creation: Oct 2006
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Handle: RePEc:cpr:ceprdp:5866

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Keywords: common pool; deficit bias; fiscal institutions; fiscal restraints; fiscal rules; stability pact;

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Citations

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Cited by:
  1. Ringa Raudla, 2010. "Governing budgetary commons: what can we learn from Elinor Ostrom?," European Journal of Law and Economics, Springer, vol. 30(3), pages 201-221, December.
  2. Sébastien Wälti & Signe Krogstrup, 2006. "Women and budget deficits," Trinity Economics Papers tep0307, Trinity College Dublin, Department of Economics, revised Apr 2007.
  3. Jürgen Hagen, 2010. "Sticking to fiscal plans: the role of institutions," Public Choice, Springer, vol. 144(3), pages 487-503, September.
  4. Beetsma, Roel & Ribeiro, Marcos Poplawski & Schabert, Andreas, 2008. "A Comparison of Debt and Primary-deficit Constraints," CEPR Discussion Papers 6897, C.E.P.R. Discussion Papers.
  5. Roel M.W.J. Beetsma & Frederick van der Ploeg, 2007. "Partisan Public Investment and Debt: The Case for Fiscal Restrictions," Economics Working Papers ECO2007/37, European University Institute.
  6. Jerome Creel & Etienne Farvaque, 2009. "The political economy of balanced-budget rules," Documents de Travail de l'OFCE 2009-06, Observatoire Francais des Conjonctures Economiques (OFCE).
  7. Mark Hallerberg & Guntram Wolff, 2008. "Fiscal institutions, fiscal policy and sovereign risk premia in EMU," Public Choice, Springer, vol. 136(3), pages 379-396, September.
  8. Signe Krogstruo & Sébastien Wälti, 2009. "Enfranchisement and budget deficits: a theoretical note," IHEID Working Papers 01-2009, Economics Section, The Graduate Institute of International Studies.
  9. Stähler, Nikolai, 2007. "Taxing deficits to restrain government spending and foster capital accumulation," Discussion Paper Series 1: Economic Studies 2007,26, Deutsche Bundesbank, Research Centre.
  10. Xavier Debrun & Manmohan S. Kumar, 2007. "The Discipline-Enhancing Role of Fiscal Institutions," IMF Working Papers 07/171, International Monetary Fund.
  11. Roel M.W.J.Beetsma & Frederick van der Ploeg, 2007. "The political economy of public investment," European Economy - Economic Papers 276, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  12. Hallerberg, Mark & Wolff, Guntram B., 2006. "Fiscal institutions, fiscal policy and sovereign risk premia," Discussion Paper Series 1: Economic Studies 2006,35, Deutsche Bundesbank, Research Centre.
  13. Jürgen von Hagen & Charles Wyplosz, 2008. "EMU's Decentralized System of Fiscal Policy," European Economy - Economic Papers 306, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  14. Sophia Gollwitzer, . "Budget Institutions and Fiscal Performance in Africa," Discussion Papers 10/02, University of Nottingham, CREDIT.
  15. Simon Wren-Lewis, 2011. "Comparing the delegation of monetary and fiscal policy," Economics Series Working Papers 540, University of Oxford, Department of Economics.

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