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Public Debt and the Political Economy of Reforms

Author

Listed:
  • Pierre C. Boyer
  • Brian Roberson
  • Christoph Esslinger

Abstract

How do electoral incentives influence the choice to experiment with a policy reform that generates uncertain future benefits? To answer this question, we examine a two-period model of redistributive politics with uncertain policy outcomes involving a mixture of private and public benefits. In equilibrium, we find that the intertemporal trade-off between current policy costs and future benefits creates an incentive for politicians to use public debt to smooth spending across periods. The higher the share of policy benefits that are in the form of a public good, the higher the level of available debt-related spending on targeted policies that is necessary.

Suggested Citation

  • Pierre C. Boyer & Brian Roberson & Christoph Esslinger, 2024. "Public Debt and the Political Economy of Reforms," American Economic Journal: Microeconomics, American Economic Association, vol. 16(3), pages 459-491, August.
    • Handle: RePEc:aea:aejmic:v:16:y:2024:i:3:p:459-91
    DOI: 10.1257/mic.20220238
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    Cited by:

    1. Boyer, Pierre C. & Konrad, Kai A. & Roberson, Brian, 2017. "Targeted campaign competition, loyal voters, and supermajorities," Journal of Mathematical Economics, Elsevier, vol. 71(C), pages 49-62.
    2. Marcus Berliant & Pierre C. Boyer, 2024. "Politics and income taxes: Progress and progressivity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(4), August.
    3. Lukas Vogel, 2025. "Reforms and Investments – The Benefits of Join Implementation," European Economy - Economic Briefs 084, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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