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Inefficiency in Legislative Policymaking: A Dynamic Analysis

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  • Marco Battaglini
  • Stephen Coate

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) and the distributive spending is district-specific transfers (e.g., pork-barrel spending). Investment in the public good creates a dynamic linkage across policymaking periods. The analysis explores the dynamics of legislative policy choices, focusing on the efficiency of the steady-state level of taxation and allocation of spending. (JEL D72, E62, H20, H50)

Suggested Citation

  • Marco Battaglini & Stephen Coate, 2007. "Inefficiency in Legislative Policymaking: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 97(1), pages 118-149, March.
  • Handle: RePEc:aea:aecrev:v:97:y:2007:i:1:p:118-149
    Note: DOI: 10.1257/aer.97.1.118
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    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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