A Positive Theory of Fiscal Deficits and Government Debt
AbstractThis paper considers an economy in which policymakers with different preferences alternate in office as a result of elections. Government debt is used strategically by each policymaker to influence the choices of his successors. If different policymakers disagree about the desired composition of government spending between two public goods, the economy exhibits a deficits bias; that is, debt accumulation is higher than it would be with a social planner. The equilibrium level of debt is larger the larger is the degree of polarization between alternating governments and the less likely it is that the current government will be re-elected.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3612769.
Date of creation: 1990
Date of revision:
Publication status: Published in Review of Economic Studies
Other versions of this item:
- Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 403-14, July.
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- Robert E. Lucas Jr. & Nancy L. Stokey, 1982.
"Optimal Fiscal and Monetary Policy in an Economy Without Capital,"
Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science
532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(1), pages 55-93.
- Brennan,Geoffrey & Buchanan,James M., 2006.
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Cambridge Books, Cambridge University Press,
Cambridge University Press, number 9780521027922.
- Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 914-27, October.
- Lucas, Robert Jr., 1986. "Principles of fiscal and monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 17(1), pages 117-134, January.
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