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Fiscal Policy, Public Debt Stabilzation and Politics: Theory and evidence from the US and UK

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Ben Lockwood
Apostolis Philippopoulos
Andy Snell

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Abstract

This paper presents a two-party model of fiscal and debt policy which; (i) explicitly models the partisan, stabilisation, and (to some extent) survival motives of politicians; (ii) has predictions that are largely consistent with existing empirical finding about partisan and electoral effects in government expenditure, tax revenue, and debt; (iii) yields new predictions about how the feedback of fiscal policy on lagged debt may depend on partisan and electoral effects. These new predictions are not rejected by a test of the model on US and UK data.

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Publisher Info
Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 94-06.

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Handle: RePEc:kud:epruwp:94-06

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  1. Wolfgang Eggert & Martin Kolmar, . "Contests with Size Effects," EPRU Working Paper Series 02-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
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  2. Wolfgang Eggert & Laszlo Goerke, . "Fiscal Policy, Economic Integration and Unemployment," EPRU Working Paper Series 02-05, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
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