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

  • Zheng Song
  • Kjetil Storesletten
  • Fabrizio Zilibotti

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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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 80 (2012)
Issue (Month): 6 (November)
Pages: 2785-2803

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Handle: RePEc:ecm:emetrp:v:80:y:2012:i:6:p:2785-2803
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