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Elections and the Strategic Use of Budget Deficits

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  • Roland Hodler

Abstract

We present a model in which a conservative incumbent with preferences for low public spending can strategically run a budget deficit to prevent the left-wing opposition candidate from choosing high public spending if elected, and possibly also to ensure his own reelection. We find that the incumbent never manipulates the opposition candidate’s public spending if he can ensure his reelection; and that a conservative incumbent who runs a budget deficit to ensure his reelection may somewhat paradoxically choose high public spending before the election.

Suggested Citation

  • Roland Hodler, 2009. "Elections and the Strategic Use of Budget Deficits," Department of Economics - Working Papers Series 1074, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1074
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    1. Caballero, Ricardo J. & Yared, Pierre, 2010. "Future rent-seeking and current public savings," Journal of International Economics, Elsevier, vol. 82(2), pages 124-136, November.
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    Cited by:

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    2. Maxime Menuet & Patrick Villieu & Marcel Voia, 2021. "Does public debt secure social peace? A diversionary theory of public debt management," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(3), pages 475-501, October.
    3. Maxime Menuet & Hugo Oriola & Patrick Villieu, 2021. "Do Conservative Central Bankers Weaken the Chances of Conservative Politicians?," Working Papers hal-03479411, HAL.
    4. Giorgio Bellettini & Paolo Roberti, 2020. "Politicians’ coherence and government debt," Public Choice, Springer, vol. 182(1), pages 73-91, January.
    5. Linda Gonçalves Veiga & Francisco José Veiga, 2014. "Determinants of Portuguese local governments’ indebtedness," NIPE Working Papers 16/2014, NIPE - Universidade do Minho.
    6. Iwona Franczak, 2021. "Creative Accounting in Poland’s Sub-Sector of Local Governments," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 997-1017.

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    More about this item

    Keywords

    Voting; Budget deficits; Public Debt; Political Economics;
    All these keywords.

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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