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Political models of budget deficits: a literature review

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  • Maria Manuel Pinho

    ()
    (Faculdade de Economia da Universidade do Porto)

Abstract

Economic literature on the explanation of public deficits has been focusing on two main issues. On one hand, the accumulation of public debts in recent decades and, on the other hand, the large observed cross-countries differences on public deficits and debt. Economic arguments alone are not sufficient to explain this behavior. Therefore, recent political economy literature emphasizes the role of political and institutional factors in the explanation of the fiscal policy and, in particular, of the budget balances behavior. This paper surveys a set of political-economic models of budget deficits, providing an up-to-date, critical review of the main models. The main conclusion is the need of conducting more rigorous empirical tests.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/04.03.08_WP138_Maria%20Pinho.pdf
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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 138.

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Length: 42 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:por:fepwps:138

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Keywords: budget deficits; public debt; political economy;

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Cited by:
  1. Lavigne, Robert, 2011. "The political and institutional determinants of fiscal adjustment: Entering and exiting fiscal distress," European Journal of Political Economy, Elsevier, vol. 27(1), pages 17-35, March.
  2. Robert Lavigne, 2006. "The Institutional and Political Determinants of Fiscal Adjustment," Working Papers 06-1, Bank of Canada.
  3. Florian Chatagny & Nils Soguel, 2012. "The effect of tax revenue budgeting errors on fiscal balance: evidence from the Swiss cantons," International Tax and Public Finance, Springer, vol. 19(3), pages 319-337, June.

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