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A Behavioural Model of Government Budget Deficits

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  • Van Velthoven, Ben C J
  • Van Winden, Frans A A M

Abstract

This paper stresses the need for a behavioral-theoretic explanation of budget deficits. From that perspective, the existing literature is evaluated. Using Frans A. A. M. Van Winden's interest function approach, a formal model is developed in which government expenditure, the tax rate, and the budget deficit are simultaneously determined. Using this model, the paper analyzes the impact on budget deficits of the preferences of different social groups; the social power configuration; the time horizon of the state; the interest rate; and the time pattern of national income.

Suggested Citation

  • Van Velthoven, Ben C J & Van Winden, Frans A A M, 1990. "A Behavioural Model of Government Budget Deficits," Public Finance = Finances publiques, , vol. 45(1), pages 128-161.
  • Handle: RePEc:pfi:pubfin:v:45:y:1990:i:1:p:128-61
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    References listed on IDEAS

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    1. Konrad, Kai A., 1989. "Kapitaleinkommensteuern und beschleunigte Abschreibungen bei Unsicherheit," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 404-427.
    2. Roger H. Gordon, 1985. "Taxation of Corporate Capital Income: Tax Revenues Versus Tax Distortions," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 1-27.
    3. Hayne E. Leland, 1974. "Production Theory and the Stock Market," Bell Journal of Economics, The RAND Corporation, vol. 5(1), pages 125-144, Spring.
    4. Konrad, Kai A., 1991. "The Domar-Musgrave phenomenon and adverse selection," European Journal of Political Economy, Elsevier, vol. 7(1), pages 41-53, April.
    5. Boadway, R. W. & Bruce, N., 1979. "Depreciation and interest deductions and the effect of the corporation income tax on investment," Journal of Public Economics, Elsevier, vol. 11(1), pages 93-105, February.
    6. Feldstein, Martin S, 1969. "The Effects on Taxation on Risk Taking," Journal of Political Economy, University of Chicago Press, vol. 77(5), pages 755-764, Sept./Oct.
    7. Evsey D. Domar & Richard A. Musgrave, 1944. "Proportional Income Taxation and Risk-Taking," The Quarterly Journal of Economics, Oxford University Press, vol. 58(3), pages 388-422.
    8. Sandmo, Agnar, 1974. "Investment Incentives and the Corporate Income Tax," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 287-302, Part I, M.
    9. Fane, G., 1987. "Neutral taxation under uncertainty," Journal of Public Economics, Elsevier, vol. 33(1), pages 95-105, June.
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    Cited by:

    1. Darby, Julia & Li, Chol-Won & Muscatelli, V. Anton, 2004. "Political uncertainty, public expenditure and growth," European Journal of Political Economy, Elsevier, vol. 20(1), pages 153-179, March.

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