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The Common Pool Problem of Intergovernmental Interactions and Fiscal Discipline: A Stackelberg Approach

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Giovanna Bimonte

    (University of Salerno, Department of Economics and Statistics)

  • Pietro Spennati

    (Ministry of Economics and Finance, Department of General State Account)

Abstract

In common pool models fiscal outcomes are determined by the decision-making rule that is used to aggregate conflicting interests into a single budget and they can affect spending bias. This paper analyses a model in which the minister of finance internalizes the common pool budget’s externality. From an institutional point of view, this assumption is realistic because he takes in account the budget equilibrium. Formally, this is reflected in the assumption that the minister of finance maximizes à la Stackelberg his utility function. In Stackelberg equilibrium, leader’s expenditure choice is grater than in Cournot-Nash result, while the deficit bias is lower due to agenda setting power over spending ministers.

Suggested Citation

  • Giovanna Bimonte & Pietro Spennati, 2014. "The Common Pool Problem of Intergovernmental Interactions and Fiscal Discipline: A Stackelberg Approach," Springer Books, in: Cira Perna & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, edition 127, pages 31-34, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-05014-0_7
    DOI: 10.1007/978-3-319-05014-0_7
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