Politicians and soft budget constraints
AbstractWe study soft budget constraints from the perspective of political economics. A partly partisan government confronts a budget crisis in a politically important sector, e.g. like the health care sector. To what extent the government wants to make additional grants to the sector depends on economic conditions and on the preferences of the government, both unknown to the electorate. Thus, the government’s budget response gives a signal of its preferences, and may thereby influence the probability that the government is re-elected. As a result, the handeling of a budget crisis becomes inefficient even from an ex post point of view, in the sense that it does not react adequately to changing economic conditions.
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Bibliographic InfoPaper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2001:2.
Length: 17 pages
Date of creation: 30 Jun 2009
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Political economics; budget constraints; budget crisis;
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- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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