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Inefficiency in Legislative Policy-Making: A Dynamic Analysis

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  • Stephen Coate
  • Marco Battaglini

    ()
    (Economics Princeton University)

Abstract

This paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining. The policy space incorporates both productive and distributive public spending and distortionary taxation. The productive spending is investing in a public good that benefits all citizens (e.g., national defense or air quality) and the distributive spending is district-specific transfers (e.g., pork barrel spending). Investment in the public good creates a dynamic linkage across policy-making periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady state level of taxation and allocation of tax revenues. The model sheds new light on the efficiency of legislative policy-making and has a number of novel positive implications.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2005 Meeting Papers with number 209.

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Date of creation: 2005
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Handle: RePEc:red:sed005:209

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Keywords: political economy;

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References

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  1. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March.
  2. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  3. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
  4. Stephen Coate & Marco Battaglini, 2005. "Inefficiency in Legislative Policy-Making: A Dynamic Analysis," 2005 Meeting Papers 209, Society for Economic Dynamics.
  5. Eraslan, Hulya & Merlo, Antonio, 2002. "Majority Rule in a Stochastic Model of Bargaining," Journal of Economic Theory, Elsevier, vol. 103(1), pages 31-48, March.
  6. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers b96440ba0bfa06ca550ac40aa, Penn Economics Department.
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  8. Marina Azzimonti Renzo, 2004. "On the dynamic inefficiency of governments," 2004 Meeting Papers 228, Society for Economic Dynamics.
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  10. Eraslan, Hulya, 2002. "Uniqueness of Stationary Equilibrium Payoffs in the Baron-Ferejohn Model," Journal of Economic Theory, Elsevier, vol. 103(1), pages 11-30, March.
  11. Acemoglu, Daron & Robinson, James A, 1999. "Inefficient Redistribution," CEPR Discussion Papers 2122, C.E.P.R. Discussion Papers.
  12. Stephen Coate & Stephen Morris, . "Policy Persistence," CARESS Working Papres 97-2, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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  17. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  18. Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2003. "Democratic Public Good Provision," CEPR Discussion Papers 4044, C.E.P.R. Discussion Papers.
  19. Leblanc, William & Snyder, James Jr. & Tripathi, Micky, 2000. "Majority-rule bargaining and the under provision of public investment goods," Journal of Public Economics, Elsevier, vol. 75(1), pages 21-47, January.
  20. Daron Acemoglu, 2002. "Why Not a Political Coase Theorem? Social Conflict, Commitment and Politics," NBER Working Papers 9377, National Bureau of Economic Research, Inc.
  21. Eraslan, H. & Merlo, A., 2000. "Majority Rule in a Stochastic Model of Bargaining," Working Papers 00-05, C.V. Starr Center for Applied Economics, New York University.
  22. Banks, Jeffrey S. & Duggan, John, 1999. "A Bargaining Model of Collective Choice," Working Papers 1053, California Institute of Technology, Division of the Humanities and Social Sciences.
  23. Chari, V V & Jones, Larry E & Marimon, Ramon, 1997. "The Economics of Split-Ticket Voting in Representative Democracies," American Economic Review, American Economic Association, vol. 87(5), pages 957-76, December.
  24. Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October.
  25. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-64, August.
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