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Rotten Parents and Disciplined Children: A Politico-Economic Theory of Public Expenditure and Debt

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  • Zheng Song

    (Fudan University)

  • Kjetil Storesletten
  • Fabrizio Zilibotti

Abstract

We test the implications of the theory in the presence of political shocks affecting the taste for public consumption. Government debt is mean reverting and left-wing governments are predicted to accumulate less debt. Data from the US and from a panel of 21 OECD countries confirm the main predictions of the theory.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 685.

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Date of creation: 2007
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Handle: RePEc:red:sed007:685

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  1. Automatic fiscal discipline
    by Economic Logician in Economic Logic on 2009-07-20 18:55:00
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