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Disposable income, unemployment, inflation and state spending in a dynamic political-economic model

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  • F. Ploeg

Abstract

This paper formulates a medium-term macroeconomic model of disposable income, unemployment, inflation and state spending, proposes a theory of qualitative choice to explain electoral popularity in terms of these variables and develops three approaches to the formulation of political-economic policy. The first approach is static, sets the tax rate to reconcile the interests of various pressure groups and yields a political trade-off between the private and public sector. The second approach relies on maximizing the probability of winning the next election and gives rise to a political business cycle unless the electorate votes strategically. The implications of crowding out of private investment under alternative monetary rules, autonomous behaviour of the state bureaucracy and tax-indexation for the political business cycle are also examined. The third approach analyzes the objective of maximizing the uninterrupted length in office. It yields a short-run political cycle superimposed on a longer cycle. Copyright Kluwer Academic Publishers 1989

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  • F. Ploeg, 1989. "Disposable income, unemployment, inflation and state spending in a dynamic political-economic model," Public Choice, Springer, vol. 60(3), pages 211-239, March.
    • Handle: RePEc:kap:pubcho:v:60:y:1989:i:3:p:211-239
    DOI: 10.1007/BF00159395
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    Cited by:

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    2. Hans G. Bloemen & Arie Kapteyn, 1993. "The Joint Estimation of a Non-Linear Labour Supply Function and a Wage Equation Using Simulated Response Probabilities," Annals of Economics and Statistics, GENES, issue 29, pages 175-205.
    3. Nijman, Theo & Verbeek, Marno & van Soest, Arthur, 1991. "The efficiency of rotating-panel designs in an analysis-of-variance model," Journal of Econometrics, Elsevier, vol. 49(3), pages 373-399, September.
    4. Yury A. Pleskachyev & Yury Yu. Ponomarev & Matvey A. Saprykin, 2023. "Territorial Planning and Forecasting of Economic Indicators by Machine Learning Methods [Территориальное Планирование И Прогнозирование Экономических Показателей Методами Машинного Обучения]," Russian Economic Development, Gaidar Institute for Economic Policy, issue 9, pages 46-57, September.
    5. Karl Wärneryd, 1993. "Anarchy, Uncertainty, And The Emergence Of Property Rights," Economics and Politics, Wiley Blackwell, vol. 5(1), pages 1-14, March.
    6. van der Ploeg, F., 1990. "Two essays on political economy : (I) The political economy of overvaluation (II) Election outcomes and the stockmarket," Other publications TiSEM e9e7b3e1-bab5-453a-9c77-5, Tilburg University, School of Economics and Management.
    7. Eduard J. Bomhoff, 1991. "Stability of Velocity in the Major Industrial Countries: A Kalman Filter Approach," IMF Staff Papers, Palgrave Macmillan, vol. 38(3), pages 626-642, September.

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