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Inefficiency in Legislative Policymaking: A Dynamic Analysis

  • Marco Battaglini
  • Stephen Coate

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)

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 1 (March)
Pages: 118-149

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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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  7. Marco Battaglini & Stephen Coate, 2005. "Inefficiency in Legislative Policy-Making: A Dynamic Analysis," NBER Working Papers 11495, National Bureau of Economic Research, Inc.
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  18. 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.
  19. Armo Gomes & Philippe Jehiel, 2001. "Dynamic Processes of Social and Economic Interactions: On the Persistence of Inefficiencies," Penn CARESS Working Papers 76ff153ae29996d16c454e473, Penn Economics Department.
  20. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
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